“I want to switch mortgage lenders before closing. Why? I am getting a great rate now but my payments will go up next year. Or, maybe I am just paying too much interest. How do I switch mortgage lenders and how much interest am I really paying?”
Mortgage lender’s policies
There are many different answers to this question depending on your situation. First, you need to understand what your mortgage lender’s policies are regarding changes of interest. For example, some lenders allow you to convert your adjustable rate mortgage into a fixed rate mortgage at any time before the loan closes. Other lenders have a limit of no more than five percent changes to your interest rate at any one time.
Most mortgage lenders do not offer this option. Before you begin shopping for a mortgage lender to do business with change your payment terms based on what you can afford. If you have enough equity in your home to cover your payments, you do not have to change your mortgage. But if you owe more on your mortgage than you can afford to pay right now, you need to contact your lender and discuss your options.
If you make your monthly payment you should be getting a good rate
However, if you are not in a situation to make your payment until a later date the interest rate will go up. This could mean that you will have extra money to put into the loan after you pay off the loan. Switching your loan to a different lender with a lower rate can save you hundreds or thousands of dollars over the life of the loan. If you find that this is the best option for you, contact your lender immediately.
You can also negotiate with your lender to have interest only or a variable rate applied to your loan. This means that you will have a portion of your payment reserved for the interest. You can use the difference to pay down your principle. Changing to this type of payment before you close your deal can save you money.
Find out if there are any competing mortgage lenders willing to work with you
If you search for mortgage loans online you can see what others are offering. The good thing about searching online is that you are able to compare lenders side-by-side. There is no reason to feel uncomfortable asking questions or to feel guilty if you do not get satisfactory answers to your questions. You should also note that not all lenders will change their terms once you have decided to switch. Check with other mortgage lenders that you are considering to see if they will match the interest rate or payment you are seeking.
When you are looking for a new lender be aware of your credit score. Many lenders consider your credit score to be a part of your financial portfolio. If your credit score is low, there are many lenders who will charge a higher interest rate or offer a lower loan term. This can make paying off your debts more difficult and take longer than necessary. On the other hand, if your credit score is high you can get a better interest rate, longer loan terms, and larger principal payments.
Also see: What Is the Home Owners Loan Corporation