How to Lower a Mortgage Interest Rate Without Refinancing

A lower interest rate can shave a significant amount off your monthly mortgage payment.

A lower interest rate can shave a significant amount off your monthly mortgage payment.

Your neighbor's mortgage interest rate is a full point lower than yours. Your co-worker's is two points lower. You want one of these lower rates, but you don't want to go through the hassles or pay the costs associated with refinancing your existing mortgage loan: The Federal Reserve Board says that the typical refinance costs from 3 percent to 6 percent of your outstanding mortgage loan balance. The good news is that you might be able to persuade your lender to lower your rate. The bad news? You'll usually have to be suffering through a financial hardship to do so.

Call the company to which you send your monthly mortgage payment and explain that you'd like a lower interest rate but that you don't want to refinance your mortgage loan. If you are not suffering a financial hardship, explain this at that time. Your lender might agree to lower your rates to keep you as a customer, especially if you have a history of making your loan payments on time. When you refinance, you don't have to work with the company currently servicing your mortgage loan. This means that you can take your business to another lender, something your current lender may want to avoid.

Tell your mortgage lender if you are suffering a financial hardship -- you may have lost a job or suffered a serious injury that has eaten away at your monthly income -- and that you need to lower your interest rate to afford your monthly mortgage payments. Your lender might agree to lower the rate on its own, or it might work through the federal government's Home Affordable Modification Program. This program provides financial incentives to lenders who agree to rework the mortgage terms of struggling homeowners to help them lower their monthly mortgage payments. The program, better known by the acronym HAMP, is a way to prevent homeowners from falling behind in their loan payments and eventually losing their homes to foreclosure.

Determine whether you meet the requirements necessary for a HAMP modification If your lender agrees to modify your mortgage loan through the program. These requirements state that you must have taken out your mortgage loan on or before Jan. 1, 2009, and must owe no more than $729,750 on your primary residence. You must also be employed and be able to demonstrate that you are suffering a financial difficulty that is making it difficult for you to make your monthly mortgage payments.

Send a financial hardship letter to your lender if you hope to gain your interest-rate reduction through HAMP. This letter should spell out why you are struggling to make your mortgage payments. After your lender receives this letter, it will make a financial decision on whether to lower your interest rate. It's important to note that no lender is required to rework the terms of your loan either on its own or through HAMP.


About the Author

Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.

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