There’s a lot of talk in today’s financial circles about homeowners refinancing their homes and undergoing other kinds of mortgage modification processes. The terms can be complicated and confusing for many. Many homeowners find themselves asking if refinancing or mortgage modification is right for them. Let’s cover some ground about what these phrases mean, and whether they are right for you.
Simply put, refinancing replaces an existing debt obligation (i.e. your mortgage) with a new one under different terms. Refinancing doesn’t change your mortgage; rather, it replaces the existing loan with a new one. It involves your lender performing a credit check. So, if you don’t have a good credit score, refinancing might not be an option available to you.
Mortgage modification (much like refinancing) can have a wide variety of meanings, but essentially, it refers to a process in which the mortgage is modified to different terms outside of the buyer and lender’s original agreement. If you don’t want to have a credit check performed, this is a better alternative you may wish to consider. In this situation, your new terms are decided exclusively by you and your lender. You do not have to go get a secondary loan like you have to when refinancing.
Depending on how your credit score is and whether or not you’ve been able to maintain payments, refinancing or mortgage modification can be beneficial options for you to consider as you reevaluate your mortgage.
Other posts will cover how you can refinance and modify your mortgage.