Mortgage Modification vs. Refinancing in Florida

Slowly but surely, prime mortgage rates are creeping back up toward pre-pandemic levels. This is expected to cool off what has been a red-hot real estate market in Florida. With eviction and foreclosure moratoriums also expiring, many Floridians are feeling the financial crunch and wondering what they can do to keep their houses. 

Depending on your long-term goals (and short-term motivations), you might want to consider either refinancing your mortgage or negotiating with your existing lender to obtain more favorable loan terms. To be clear, a mortgage refinance is NOT the same as a mortgage modification. 

A mortgage modification is suitable for borrowers (homeowners) who are struggling to satisfy their monthly mortgage payments. Perhaps you don’t have enough money left over for necessities after paying your mortgage. Or, maybe you’ve already fallen behind.

Regardless, a modification is for borrowers who need assistance to continue paying off the loan. As a result, many lenders require borrowers to prove financial hardship before altering the mortgage’s terms. A successful modification might result in: 

  • A longer loan term;
  • Lower principal;
  • Reduced interest rate; or
  • Reduced late fees. 

On the other hand, a mortgage refinance involves severing ties with your current mortgage and getting a completely new mortgage with the same or different lender. Mortgage refinancing takes place in rosier circumstances; for instance, many people refinance their mortgage when interest rates are lower, as they are right now. 

To illustrate a refinance, let’s say you bought a house for $300,000 in 2014. You paid $50,000 as a down payment and, as a result, have a beginning mortgage balance of $250,000 with a 4.5 percent interest rate. 

After a few years, your balance is $180,000. You find a lender who’s willing to offer an interest rate of 3.1 percent. This new lender agrees to pay off the remaining $180,000 balance to your original lender. You now have a lower mortgage principal and interest rate. Depending on your long-term goals with the house, refinancing your mortgage could free up some money for renovations or let you tap into the equity.

Why You Need an Attorney

Without a qualified and experienced Florida real estate attorney, your current lender might not be motivated enough to negotiate a modification. Our team has helped countless homeowners bring their mortgage lenders to the negotiating table and, ultimately, avoid foreclosure. In refinancing transactions, we can ensure your legal documents are compliant for a smooth process. 

Alvarez Law Group is currently offering discounts on our real estate closing services for veterans, first responders, and law enforcement. We stand prepared to help you keep your home or close on the house you want. Call us at (786) 620-2820 to schedule your initial consultation.

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