Understanding Curtailment in Mortgages
Understanding Curtailment in Mortgages: This article provides an overview of mortgage curtailment: what it is, how it works, and when homeowners may consider it. Learn more about this important mortgage term.
Understanding Curtailment in Mortgages
Mortgage curtailment is an option available to homeowners who want to either shorten the term of their mortgage or lower their monthly payments on a mortgage. When a homeowner opts for a curtailment, a portion of the outstanding principal balance is paid in a lump sum, resulting in a reduced balance and thus a new payment schedule.
It is important to understand that if you are considering a mortgage curtailment, it may involve a refinancing process. This means that you will be required to fill out additional paperwork and may incur loan related fees and penalties that can vary between lenders.
When it comes to deciding if you should pursue the option of mortgage curtailment, there are a few things you should consider. For starters, you need to ensure that the upfront cost of the refinancing is not greater than the savings you will receive in the long run. You should also take into account the loans and fees associated with the refinancing, as well as any interest rate changes that may occur.
Another factor to keep in mind is that when you do a mortgage curtailment, it will have a positive effect on how much interest you pay over the term of your loan. This is because a lump sum payment at the beginning decreases your loan principal. As your balance decreases, so does the interest you will be paying on the remaining balance.
If you are looking to reduce your monthly mortgage payments without extending the length of the loan, a mortgage curtailment could be a suitable option. Before committing to this option, make sure to speak with a mortgage lender to ensure that you understand the associated costs and the long-term effects. This will help you decide if this is the right course of action for you.