You May Be Able to Lower Your Mortgage Payment Without Refinancing

As the 10-year Treasury yield begins another downward slide, loosely tied mortgage rates are beginning to move in that direction, too.

Many may have taken advantage of extremely low-interest rates to refinance a mortgage – or purchase a new home – over the past few years. If that’s you, your mortgage rate and payment may be at a level that’s as good as it’ll get.

At least right now.

But, if you have a mortgage with an interest rate above 3.5% or so, you may want to take a look at options to get that rate, and thus your monthly mortgage payment, a little lower.

A while ago we wrote a piece when interest rates were close to all-time lows, hitting the high points of refinancing and providing resources to help in getting the best refinance deal possible.

You can view the recently updated post at this link.

And while you may be able to work a refinance that costs you little, or even provides you money in your pocket at closing, that’s not always the case. Most mortgage refinances come with a variety of costs/fees that will take several years of payments from which to break even.

But, there is a way to lower your mortgage interest rate – and, obviously, your monthly payment – without going through a full refinancing of your mortgage.

Mortgage Loan Modification

Known as a loan modification, some lenders are willing to lower your mortgage interest rate absolutely free – no fees, no hidden costs, no charge at all.

Others will do a loan modification with a lower fee than a traditional mortgage refinancing.

For example, Chase bank has recently been offering some of its mortgage customers a loan modification to a lower interest rate for a $995 origination fee. Not free, but a better deal than a full refinance, that’s for sure.

Unfortunately, not all banks offer loan modifications.

And the ones that do, often are very selective when it comes to which clients will be eligible to take advantage.

There is no set of rules regarding who may, or may not, be able to get a loan modification. Likely, credit score plays into eligibility, along with the relationship the client has had with the bank, the loan to value of the current mortgage and other factors the banks likely would never divulge.

The primary reason for this post, though, is to bring to light the loan modification option so those interested can at the very least make an inquiry with their lender regarding availability.

If the lender does offer the loan modification option, then it may be a sound alternative to a full mortgage refinancing if a lower interest rate is your goal.

Again, modifications are very situation-specific. Not every, or even most, borrowers will be eligible.

But it’s worth at least asking if the savings can be thousands of dollars of fees that are often part of a traditional refinance.

What Kind of Modification?

There is one key point regarding loan modifications.

The term “loan modification” can pertain to two different circumstances.

The first is what’s described above…a no fee/low fee modification of the current mortgage to a lower interest rate.

The second is an option some banks offer to borrowers in financial distress. A job loss or some other circumstance that negatively affects timely or in-full mortgage payments can make a loan modification available. These types of modifications primarily result in lowered payments for a set period of time while the borrower stabilizes their financial situation.

When contacting the bank, you want to be clear you’re not seeking a loan modification due to financial hardship, rather, as an alternative to a full mortgage refinance.

The Contact

When contacting your lender, you’ll want to talk with the mortgage department, not a general customer service representative who likely won’t be aware of loan modifications.

And, once you’re in touch with the mortgage department, make clear you’re not interested in refinancing, even if you may be, just a loan modification. The reason for this is mortgage representatives primarily make their money from the fees associated with refinancings. They’ll do whatever they can to steer you in that direction for their, and the bank’s, financial benefit.

Wrap Up

Mortgage rates continue to retest their lower levels.

If your current interest rate is above 3.5% or so, you may be able to lower your monthly mortgage payments with limited to no fees or costs via what’s known as a loan modification.

Unfortunately, not all banks offer loan modifications. And for the ones that do, not all mortgage customers will have them available due to a variety of requirements that lenders have in place.

But, if your financial institution does offer a loan modification option, and you qualify, it’s a great way to lower your mortgage interest rate and monthly payment will little to no out-of-pocket cost to you.

Have you had any luck with a loan modification? Let us know your bank and any specifics that may have made the modification available to you so others may be able to benefit.