Reamortizing mortgage payments? (PMI, fixed rate, interest, escrow)

[camrynh]

Anyone ever do this, or know how difficult it is, etc?

My husband and I are looking at making a large payment on our mortgage (to remove the PMI) and would like to reamortize our mortgage to decrease the payments. Is there a way to do this without refinancing, and keeping our current interest rate?

[chet everett]

Technically, yes. Basically any "portfolio lender" (those who really OWN your mortgage and have not sold it to Fannie/Freddie or a MBS pool) could do this. The problems are a) very very very few lenders hold mortgages in a portfolio & b) even if your mortgage is with a portfolio lender what is the 'upside' for them? By allowing you to re-amortize they are DECREASING their yield / return on capital, which is not exactly going to help their bottom line.

I suppose if you are a "high net worth client" with a range of business and personal investment needs some firms would be able to book this reduced yield toward their "advertising / business acquisition" costs, but somehow I do not think there are too many lenders /clients in such a situation...

[Lacerta]

Originally Posted by chet everett

b) even if your mortgage is with a portfolio lender what is the 'upside' for them? By allowing you to re-amortize they are DECREASING their yield / return on capital, which is not exactly going to help their bottom line.

Yes and no...

By allowing a borrower to re-amortize, they decrease their income in the short run in the form of lower monthly payments, but they get more back in interest in the long run.

If they didn't allow you to re-amortize, and you kept paying the higher rate, your mortgage would be paid off years sooner with thousands less in interest. Thus, I would think it is in the banks best interest overall to allow this, or even encourage it.

I suspect some banks do this automatically. I know as I have paid extra each month over the first 6 years of my loan, the "balance due" each month has been revised down about once a year. At first, I thought it was due to changing tax rates or overage in escrow and such, but the difference is more than that would account for.

[acegolfer]

Originally Posted by camrynh

Anyone ever do this, or know how difficult it is, etc?

My husband and I are looking at making a large payment on our mortgage (to remove the PMI) and would like to reamortize our mortgage to decrease the payments. Is there a way to do this without refinancing, and keeping our current interest rate?

For fixed rate mortgage, it's highly unlikely. Your monthly mortgage payment (P+I) is fixed throughout the life of the loan. If you make extra payment, it will reduce the term (= length of loan).

For adjustable rate mortgage, the extra payment will reduce your monthly payment when the rate adjusts. In this case, your term (ie 30 years) is kept constant.