Qualifying for a lower interest rate on your mortgage loan will save you money over the long haul. A lower rate of interest can also lower your monthly payments, which may help get you out of a financial bind if unexpected hardship strikes. If you find yourself falling behind in making your mortgage payments, being honest with your lender may get you a lower interest rate without you having to refinance a new loan. It can also be to your advantage to refinance to a lower mortgage interest rate even when you are managing your finances well.
Gather together any documentation you have that proves you are suffering a hardship. For example, present a letter to your lender that states that your income has been reduced or lost due to a layoff. Show medical bills and hospital appointment slips if you are falling behind in your mortgage payments because of your own or a family member’s illness.
Collect your most recent pay stubs for when you talk to your mortgage lender. List all your expenses so that the lender can consider the other bills that you must pay each month. Be prepared to show proof of any savings or other assets that you have.
Write down a list of reasons why you are requesting that your interest rate be lowered. Lenders often are willing to help out if you contact them about your financial difficulties before falling too far behind on your mortgage payments. The Federal Trade Commission recommends completing a hardship affidavit explaining why you have missed payments or are late in making your payments. Tell your mortgage lender if you’ve recently been laid off from work or are dealing with high medical bills.
Talk to your lender over the telephone to discuss your situation. Ask if the bank can reduce your interest rate or make other adjustments to your loan terms as a way to decrease your monthly payment. Show your lender that your household income and expenses are enough to make a lower payment each month if a reduced interest rate is approved. Provide evidence that you can manage the new payments but that you don’t have income enough to pay back the delinquent payments you owe. Some lenders are willing to add overdue amounts onto the mortgage principal.
Inform your mortgage provider that you’ve contacted other lenders to inquire about the current mortgage rates they are offering to individuals who are applying for home loans. This will give you a starting point to negotiate with your lender for a lower interest rate that you can afford.
Request the details in writing if your lender is willing to modify the conditions of your loan. Your lender might offer to lower your interest rate temporarily until you can catch up with your payments or until your financial situation improves. Ask that all terms be clearly stated and for the document to be signed by the appropriate officials at your lending institution.
Find out if you are eligible for the federal government’s Home Affordable Modification Program in the event that your lender isn’t willing to lower your interest rate (see Resources). The program gives homeowners who qualify the chance to modify their mortgages to make them more affordable. The Home Affordable Refinance Program is another option open to homeowners who can’t refinance their mortgages to a lower interest rate because the value of their home has decreased.
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