Did you pay EXTRA money towards a mortgage principle ?
Did your monthly minimum due amount go down as well? If not, read on.
One of the options that the banks promote the most is to refinance. However a refinance mostly benefits the bank and not you, the customer.
A refinance is when the rate is changed. A REFINANCE PROCESS CAN BE VERY COSTLY, SOMETIMES THOUSANDS OF DOLLARS.
A much better option that the bank will not inform you about is doing a recalculation/ re-modification. A recalculation is when you pay a lump sum to the bank in order to reduce your ORIGINAL PRINCIPLE balance.
However, with a recalculation, the rate stays the same but the bank will recalculate your monthly payment TO A LOWER AMOUNT !
Our office recently advised a client to request a recalculation and the client’s monthly payment dropped from $3000/month to $1100/month. That is $1,900/month saved.
Usually a recalculation is allowed to be done once or twice a year depending on your bank. The paperwork will cost around $200- $300 but will save you a lot of money on your monthly payments.
So next time, before you make an extra payment towards the principle, contact your bank and ask for a recalculation of monthly minimum due.
IF YOU DO NOT ASK THE BANK, THEY WILL NOT DO IT FOR YOU AUTOMATICALLY. GOOD LUCK.