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Get a Better Mortgage Rate Without Refinancing

Written by Nickel - 6 Comments

Get a Better Mortgage Rate Without Refinancing

Over the past few years, mortgage rates have been falling, falling, falling… Just when you think they can’t go any lower, they do. During this time, a huge number of people have refinanced. And many have refinanced again. And again.

While refinancing your mortgage isn’t a terribly hard thing to do, it’s enough of a hassle that some people that really should be doing it don’t bother. This is a potentially costly mistake.

But guess what? You don’t necessarily have to do a full-scale refinance to get a better rate. Instead, you may be able to get your lender to reduce your mortgage rate, thereby reducing your monthly obligation and/or allowing you to pay it off even faster.

Don’t believe me? Well, fellow blogger NCN over at NoCreditNeeded just did this and shaved 1.525% off the rate on his 15 year mortgage. Here’s how it went down:

NCN and his wife have been considering a refinance as rates are significantly lower than they were three years ago when they bought their home. However, they didn’t want to deal with all the paperwork, they didn’t want to start over with a new 15 year mortgage, and they didn’t want to pay a bunch of closing costs.

Inspired by our earlier article on recast your mortgage, he decided to contact his lender and ask if they could reduce his rate without changing the other terms of his mortgage. Amazingly, they agreed, and he had a new offer shortly thereafter.

I’ve heard of this happening quite often with distressed loans (wherein the rate is adjusted to help the borrower stay afloat) but it’s less common for borrowers who are in good standing. Apparently the lender decided that it was better to give up a bit of interest income to retain NCN as a reliable customer.

The change required filling out just a few documents and, while there was a processing fee involved, they’ll earn that money back based on interest savings within just seven months. Going forward, they’ll continue making their “old” payment with the difference being applied as an extra payment toward principal.

While you may only be able to pull this off if your loan servicer actually owns your mortgage (and many don’t) it can’t hurt to ask. The worst they can do is say “no” but, on the upside, you might wind up saving a ton.

Note that you might still be better off with a refinance as you can play the field and get the best mortgage rates available — perhaps lower than your current lender will offer (assuming they’re willing to play ball). But if you’d rather not go to that trouble, you should at least consider asking your lender for a better deal.

Published on August 8th, 2012
Modified on August 15th, 2012 - 6 Comments
Filed under: Debt Reduction, Mortgages

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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6 Responses to “Get a Better Mortgage Rate Without Refinancing”

  1. 1
    Paul Says:

    That processing fee sounds hefty if it takes 7 months to recover it.

  2. 2
    Nickel Says:

    Paul: I don’t know anything abou the size of his mortgage or the dollar savings so I can’t comment on the amount of the fee. That said, refinancing isn’t exactly cheap unless you roll the costs into the loan or sell points (i.e., accept a higher rate in return for cash) to cover the costs.

    If I had to guess, I’d say we’re talking about at least a few hundred dollars. I also don’t know what how close to current refi rates his lender was able to get, but if that 1.5% decrease puts him anywhere near the going rate for a full-on refi for a few hundred bucks and minimal paperwork, I’d say that’s pretty darn good.

    Remember, the perfect is the enemy of the good.

  3. 3
    Lance @ Money Life and More Says:

    Unfortunately my mortgage got sold and on top of that my balance is so low that the fees would likely eat me alive… oh well 4.625% isn’t a horrible rate if you look back over the last couple decades :)

  4. 4
    DebtKiller Says:

    It’s hard to imagine how some people don’t seem to think a few hours of paperwork and phones calls isn’t worth saving a few hunderd dollars per month. To me, it’s a no-brainer.

  5. 5
    savvy Says:

    For Lance, if your balance is low, you might want to consider a HEL. You can get them now for 1.99% with no origination fees or closing costs. While 4.625% isn’t horrible, it’s twice the rate you could be paying…

  6. 6
    Matt Says:

    I just called my mortgage company (Everbank) and asked if this was available for my loan and they said it was not because it is a Fannie Mae loan.

    Just another data point.

    I plan on moving in the next 2 years so a refinance doesn’t work out in my favor. Looks like I will just stick with my 5% rate a little longer.

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