How to Refinance a Mortgage for a Lower Payment in Retirement

Refinancing helps you stick to a balanced budget during retirement.

Refinancing helps you stick to a balanced budget during retirement.

Almost any retiree would love to have an extra $200 in his pocket each month. Although financial planners have almost always recommended that homeowners make an effort to be debt-free by the time they reach retirement, it's not always an achievable goal. When you know you'll have to drag your mortgage with you as you retire, securing a lower monthly payment can make a big difference in helping you make ends meet on a fixed income. Refinance your mortgage now to lock in a lower monthly payment for the duration of your mortgage.

Pull each of your credit reports and check them for errors, such as accounts that don't belong to you or indications of late payments when you know you paid on time. If you find any, follow the instructions on the credit report to dispute each error before proceeding with your refinance. Having a high credit score is one of the keys to getting a low interest rate that will help decrease your payment.

Gather interest rate and closing cost quotes on refinances from several lenders, including your current lender. You may get lower closing costs by sticking with your current lender, so take this into consideration as you compare rates and total costs.

Get monthly payment quotes on mortgages of several lengths and compare these to decide what length of mortgage to get. Keep in mind that a longer repayment term means you'll have to take the mortgage further into retirement. However, it also has lower monthly payments, which will be easier to make and may even allow you to put more money in your retirement accounts before you retire.

Call the loan officer at the lender you selected and let him know what length of mortgage you want. He will start preparing the paperwork for you.

Sign and return all paperwork as instructed by your loan officer. This will also include sending copies of documents like your tax returns and pay stubs as proof of income.

Tidy up your home, particularly on the outside, before the appraisal. The appraised value of your home must at least equal the amount of your refinanced mortgage for the loan to go through.

Items you will need

  • Tax returns from past two years
  • Proof of regular income, such as pay stubs

Tip

  • Refinancing before retirement is much easier than refinancing after retirement because you have proof of regular income. After retirement, you must show Social Security checks, pension payments and retirement account withdrawals, which are less likely to help you qualify for a refinance.

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