Who Do You Talk With to Get an Interest-Only Mortgage Changed to a Fixed Rate Mortgage?
Interest-only mortgages are considered to be one of the riskiest types of home loans on the market. If you have an interest-only loan, you can take the necessary steps to convert it into a fixed rate loan. There are a few ways that you could go about getting the loan changed.
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Significance
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If you are currently using an interest-only loan to secure your home, changing to a fixed rate loan can be extremely beneficial. Interest-only loans only require a monthly payment that is equal to the amount of interest that is accruing. With this type of loan, you never address the principal of the loan until the end. With a fixed rate loan, you will pay a bit towards retiring the principal of the loan every month.
Refinance
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One way to go about changing your interest-only loan to a fixed rate loan is to refinance your mortgage. In order to do this, you will need to talk to a mortgage lender. You could potentially work with the same lender that you have your interest-only loan with or you could get another lender completely. With this process, you will get money from a new loan and use it to pay off your existing interest-only loan.
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Modification
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Another option that you could potentially pursue is a loan modification. With loan modification, you can negotiate with your lender to change the terms of your loan. You will only be able to pursue this option if you are behind on your payments or in default. You will need to talk to the loss mitigation department of your lender in order to facilitate the process of a loan modification. When you modify your loan, it will negatively impact your credit.
Impact
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When you convert your interest-only mortgage into a fixed rate loan, it will generally make your mortgage payment higher. Instead of paying only interest every month, you will have to pay interest and principal. The only possible exception to this rule is if you can get a lower interest rate on your new mortgage as compared to the interest rate on your old mortgage. Going through this process will also allow you to pay off the loan instead of putting it off until the end of the mortgage.
Considerations
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If you are interested in going through the process of changing over to a fixed rate loan, you may have to shop around with multiple lenders. Many times, when people agree to an interest-only loan it is because they had bad credit during the initial mortgage application process. In order to get a fixed rate loan, you may need to have a higher credit score than you once did. The other option of loan modification is not desirable, but it can work if you are close to foreclosure.
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References
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