Getting a lower rate on your home loan can save you tons of money over the lifetime of your mortgage. The lower your rate is, the less interest you pay over the years. If your current home loan has an interest rate that’s higher than you’d like it to be, you may be wondering if there’s any way you can change it. Here’s what you need to know.
Is it Possible to Change My Current Home Loan Rate?
Yes, it is possible to change your current home loan rate. But you’ll need to go through a very specific process to do so. There are two methods you can use to adjust your interest rate. These include loan refinancing and applying for a loan modification.
Loan Modification Vs. Refinancing
Both loan modifications and refinancing have their benefits. This includes potentially lowering your current home loan rate. However, they are two distinctly different processes, with different requirements.
Loan Modification
A loan modification is an adjustment to the original terms of your loan. If interest rates are lower right now than when you obtained your loan, then you may be able to use a loan modification to reduce your mortgage rate.
However, it’s important to know that a loan modification may have a negative impact on your credit score. Furthermore, your lender is not required to approve your request and therefore a modification may be more difficult than loan refinancing. That’s why this option is usually only pursued as a last resort when a borrower is experiencing financial hardship.
Loan Refinancing
Loan refinancing is different than a loan modification because it involves replacing your current loan with a new one. Borrowers may be able to pursue this option to lower their interest rate. It can also be a useful option if you want to change your loan length and/or use your equity to gain access to additional funds.
If your goal is to lower your interest rate, then current market rates will need to be lower than your existing rate. If market rates are higher right now, then it may be best to wait.
Additionally, it should be noted that with a refinance, you will have to pay closing costs since it’s technically a new loan.
Speak to a Home Loan Expert
If you have questions about your current home loan or would like to speak to someone about a loan modification or refinance, please do not hesitate to contact our office. We would be more than happy to assist you!
