Improve the conditions of your mortgage in another bank and your savings can be very difficult sometimes due to the lack of objectivity with which the clauses offered by banks in mortgage contracts are studied, the most appropriate is not chosen and it is signed without considering the consequences that this may entail.
This causes the client to have some concerns, such as, what happens when you want to change the conditions of the mortgage? Can you get more advantageous improvements? Does changing the conditions of the mortgage lead to any penalty? And many more…
There are ways to negotiate and improve the terms of a mortgage, which we will be discussing in the following sections, so if you can negotiate the mortgage conditions in your favor, then you will end up paying a lower monthly fee than what is currently paid. The US mortgage market offers the following alternatives.
Direct Negotiation With The Financial Institution
Many people try a as their first alternative. However, this is a mistake since it should be taken as the first option to sit down and talk with the lender that granted the mortgage.
It is recommended that before negotiating any improvement of a mortgage and achieving important positive changes, a new financial scenario must be presented to the bank. Similarly, the person must have met each of the installments of their mortgage. That is, you must have a good customer profile.
In this case, a mortgage novation may be requested, which is nothing other than a rethinking of its conditions. This figure allows extending the repayment terms, the established interest rate, and even the ownership of the credit.
It is important that before sitting down to negotiate with the bank, you are very clear about what you want to obtain. Likewise, you must know how far you are willing to give in to the entity’s representatives. It must be borne in mind that the intention is to improve conditions and not make them worse.
This is perhaps a somewhat more drastic procedure since it consists of changing the mortgage to another financial institution. In this way, better conditions for payment can be obtained.
Generally, in subrogation, the change in the interest rate, the repayment period, and the commissions is requested. On the other hand, you can extend the term of the credit as well as reduce the monthly payment installments.
Before determining to subrogate a mortgage, the following should be considered:
New bank loan
The subrogation could be transformed into a new bank loan and this will generate new expenses that were faced when the mortgage was obtained for the first time. These expenses can be taxes of legal acts, consultancies, notary, among others.
Capital to be amortized
This element is extremely important to consider since if there is little capital to be amortized, it is not profitable to make the change from one financial institution to another. This is because the expenses that would be generated would be greater economic damage than the benefits that can be obtained.
This option must be very well thought out because although it is true that this professional will act as an intermediary between the financial institution and the debtor, it is also true that he will charge a commission for his services.
Although the mortgage broker only charges when the change or improvement of the mortgage is made, this does not properly mean savings since a professional would be being paid to do the job that the applicant could well do.
When To Apply For Mortgage Improvements
Several reasons can drive the debtor to improve the conditions of his mortgage. These include:
Change of credit type
It is currently estimated that in the short term the economic recession due to the pandemic will continue. This means that you will see a constant fluctuation in the payment rates.
For example, if you have a variable rate loan, market fluctuations can drive interest to high levels. This would undoubtedly force the debtor to pay more.
However, if you negotiate to move to a fixed interest rate loan, certainly, you will always and you will not have the constant pressure of changes in the reference indices.
Get fresh money
If the capital of the mortgage is increased, the money can be used to carry out reforms in the home and improvements in its equipment without using its own resources.
It is important that when choosing to change the principal of the mortgage, it is taken into account that a higher monthly payment will be paid. That is why you must be aware of the financial reality of the debtor.
Lower the mortgage
If a correct negotiation is carried out, it is possible to significantly reduce the interest of the monthly payments of the mortgage. Similarly, the payment term may be shortened, so that the debt can be canceled in less time. This in the long run will lead to significant savings.
Avoid a default
If the debtor’s economic situation is not the best and it is estimated that he is on the way to a non-payment of the mortgage payment, it is time to renegotiate with the financial institution. In this way, the term of payment of the debt can be lengthened so that the installments of the monthly payments are reduced.
Likewise, a grace period or dead time may be requested. In this way, the debtor’s finances can be stabilized to meet the commitments later.