Can I Get a Lower Rate Without Refinancing?
If you’re feeling the heat from paying a high interest rate on your mortgage, you might be considering refinancing your home. However, consider this: refinancing usually requires a ton of paperwork, a lot of time, and a whole new set of closing costs.
Can you get the lower interest rate that you want without doing a full home refinance? In some cases, you can -- and now, you can find out how.
If You’re Struggling to Pay, Ask for a Loan Modification
If you’re seriously struggling each month to make your mortgage payments, one of the best ways to get an interest rate reduction could be to request a loan modification. In order to qualify for a loan modification, you will typically have to:
Prove that you will not be able to make your current mortgage payments
GIve your lender specific documentation about your financial situation, usually including:
A hardship statement
Undergo a trial period to prove that you can make new, modified payments
Loan modifications come in several forms, including proprietary modifications, which are specific to a particular lender, and Fannie Mae or Freddie Mac modifications, such as the Fannie Mae and Freddie Mac Flex Loan Modification Program.
If You Just Want a Lower Rate, Try Simply Asking Your Lender
In contrast, if you’re a borrower in good standing, you might want to simply try asking for one. While not particularly common, this practice is growing in popularity, since many lenders don’t want to lose a good customer simply because they want to save a little more.
For example, if you’ve had your mortgage or 3-5 years and interest rates have fallen significantly, tell your lender that you’re considering refinancing with a different company. If you’re lucky, they’ll give you a reduction. In some cases, they may decide to reduce your monthly payments, while in others, they might keep your monthly payment the same, while rolling the reduction into your principal.
Other Ways to Save On Mortgage Payments
While reducing your interest is a great way to save money, it’s not the only way to reduce the amount of money you’re paying each month. For example, if you have more than 20% equity in your home and you’re paying private mortgage insurance (PMI), you can ask your lender to cancel it, which can significantly reduce your monthly mortgage payments.
If You Have a VA or FHA Loan, Consider a Streamline Refinance
While this FAQ is about how to reduce your interest rate without refinancing, it’s important to remember that not all refinances are the same. For example, if you have a VA loan or an FHA loan, you might want to look into a FHA or VA streamline refinance. Unlike a traditional refinance, a streamline refinance only takes a few weeks, and typically requires much less paperwork. Plus, it can often cost less than a regular refinance -- saving you time and money.