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Changing mortgage loan amount to reduce payment

Tue Aug 8, 2006 11:08AM | By Tony

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Q: I refinanced my house in March, 2003. I took 5 year adjustable rate mortgage at 3.875%. The mortgage loan amount was $150,000 and the monthly principal and interest payment has been $705.36. I've been making additional principal payments and, after 3 years, my mortgage loan is down to about $117,000. Still paying $705, I feel that I am overpaying now too much interest, but I hate to refinance because the mortgage rates are much higher and I have to pay closing costs. The question is can I have my bank reduce the mortgage amount to this $117,000 or so, and subsequently my monthly payments while keeping my interest rate at the original 3.875% for the reminder of the original 5 year term? My payment then would be only $550.51.

A: Changing mortgage loan amount and the payments is possible. A lot depends on the bank. You didn't mention which lender has your mortgage, but Washington Mutual and Wells Fargo do what they call a loan recalculation, if you pay off certain percentage of the initial amount off. There is a fee around $250 and all terms you have to discuss with the lender. Often, you may be asked to prepay an additional amount toward the principal. If your lender agrees to change your mortgage amount and monthly payments leaving the rest in place, make sure you check all the numbers so the would reflect exactly what you are looking for. So contact your bank customer service.

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