Mortgage rates in New Zealand (we're specifically talking about Dunedin) continue to fall, so this may be the perfect time to reduce your mortgage payments by extending your loan.
However, many homeowners are unaware as to how they are affected by the present financial climate in the country, and so they are liable to miss out on precious opportunities. For example, the average fixed rate on 30-year mortgages has fallen below four percent, a rate significantly lower than many homeowners’ current mortgages.
The simplest way to reduce your mortgage is to refinance your loan. Typically, this means restructuring your loan from being paid over the course of ten or fifteen years to being repaid over thirty years.
Many homeowners are turned off by the idea of extending their home loans beyond what already seems like an endless amount of time. For others, refinancing their home can appear to be nothing more than procrastination, and so refinancing is automatically associated with careless planning.
However, the truth is of the matter is far more complex, and for many homeowners extending their home loan is the best option. Especially now with historically low interest rates, prolonging one’s mortgage has the ability to free up cash in the short term.
This money can be used to pay off debts that have higher interest rates, make investments that will yield a high ROI in the long-term, or for any discretionary expense.
Alternatively, there are government-backed options that allow delinquent homeowners the possibility of preventing foreclosure. These programs include the Streamlined Modification Initiative, open to home buyers with loans backed by Freddie Mac or Fannie May, and the Home Affordable Modification Program.
These programs can help keep struggling homeowners above water, providing repayment terms that one would be unable to reach with the lenders directly.
While these are the two most effective ways of reducing your mortgage payments, many buyers are mistakenly under the impression that filing for bankruptcy would be helpful in this regard. It is crucial to understand that bankruptcy will not save you from foreclosure: the entity from which you borrowed your loan will almost certainly have a lien on your house, irrespective of whether you file for bankruptcy. Filing for bankruptcy only has an impact on certain types of debts, but it will have no impact on the terms of your mortgage.
Instead, attempt to negotiate directly with your lender, in order to reach amicable terms. After all, if you have reached the point of foreclosure, your lender won’t be receiving any more interest payments from you. It is likely the case that it will be most profitable for your lender to reach an agreement with you, so you can use this to your advantage. Be honest, explain your situation, and you may very well find yourself on a path to reduced mortgage payments.
Put simply, reducing your mortgage payments will almost always include applying for a loan modification program, which is not inherently a good or bad thing. It all depends on the particulars of your situation, and for many homeowners, it’s a breath of fresh air and a wise financial decision.
We put together a free video to show you how we can help you pay down your mortgage faster and easier…