A less common option, mortgage modification is not a mortgage refinance, and will help you save money. Want to learn more? Read on.
Mortgage modifications don't require as much as a refinance. A mortgage modification is done through your existing lender, making permenant changes to the terms of the mortgage you're already paying. Unlike a refinance, this does not require a new loan. It enables you to lower your interest rate without having to start paying on another loan and deal with the hassle of closing all over again. The process will cost you a few hundred dollars and may be done via mail with the lender.
Sadly, no. Mortgage modification is only available if your lender hasn't sold your loan. The fact is that the majority of mortgages are sold by their lender to another company, usually Freddie Mac or Fannie Mae. These agencies create bundles of mortagages which investors then buy into. At this point, the mortgage becomes securitized which means the interest rate cannot be changed.
Contact your lender. Ask if they offer mortgage modification. Make sure they know you're referring to reducing the interest rate of your current loan, and not switching to another loan through them, because some lenders use the term to describe the processing of changing from one loan type to another. If they don't, ask what kind of streamlined refinancing they offer, because this will cost you less, and will be less hassle than moving to another lender. Even with streamlined refinancing, you may find yourself paying for a credit report and appraisal, depending on the lender, their policies, and the date of the original loan. Some banks don't require an appraisal or credit report if the loan was taken out within the last 12 months, because they can look closely at your payment history to make their decision.
Move to another lender if you will save enough money to deal with the hassle of closing and the other costs associated with a refinance or if you will get enough cash out of the refinance to cover other debts and expenses to consolidate it all into the new mortgage payment. If you decide to move to another lender, prepare to shop around to find the best deal.