Reader Tip: How we lowered the interest rate on our mortgage — just by asking!

Chris emailed in the following tip:

Up until a week ago, we had about 10 years left on our mortgage at 4.125%. We were quite happy when we got the 4.125% rate a couple of years ago, but I’ve been noticing rates dropping even lower.

I called the credit union that holds our mortgage and asked if there was anything they could do for us (keep in mind we have always been on time with our payments and have an excellent credit score). Just like that, they offered to drop the rate to 3.125% —  all we had to do was sign the paperwork and send it back in the postage paid envelope!

I can’t figure out why on earth the credit union would agree to drop our interest rate for no fee — and I don’t think every mortgage situation would be this simple — but I guess this goes to show that it certainly never hurts to ask! -Chris

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Comments

  1. Whitney says

    This is a great tip! I imagine with rates being so competitive right now, a mortgage lender would prefer to lower your rate for free rather than risk losing you to a competitor.

    My own mortgage company allows you to change your mortgage product entirely as long as it’s been 12 months since the last change. However, we have to pay a fee of $350. No reappraisals or closing costs. We simply sign a form and send it back. Rates have dropped so dramatically the last few years, we’ve lowered our rate every spring, and the change has paid for the fee within 3 months! I could never have imagined rates would be so low. If all goes well, we’ll be mortgage free in a little over 4 years!

      • says

        We are with a bank (a local one), and they have lowered our rate for free TWICE! We started at 5.7%5 on a 30-yr and are down to 4.3%! Doesn’t hurt to ask the bank :)

      • Whitney says

        No, it’s not a credit union, but its a lending cooperative. They also lowered everyone’s rate (regardless of the loan product) by .5% last year. No paperwork or anything. Just a lower bill the next month. Local banks and credit unions can have slightly higher rates at first, but I’ve found they do a lot more to keep you as their customer over the large national banks and lenders.

        • J says

          Figures, ours with with a big bank…hmmm. Guess, we will just bite the bullet and keep paying it down fast.

  2. J says

    Chris, congratulations! That is amazing. Our rate is 4.25% and when I called I was told we could refinance…sigh. Not so good, I would rather apply the refinance fees to the balance (less than 12 years) than pay that.

  3. Toni says

    Last year we did this at our credit union, but there was a $750 charge. It lowered our rate from 5.25% to 3.5% and we took the 20+ years we had left on our mortgage down to 15 years. Our monthly payment went up $2 a month!! For $750 we got rid of years of monthly payment. We just had to return the signed paperwork (I think it was 1 page) that they used as an addendum to our original mortgage.

    • Chris says

      Toni, we had the same $750 charge when we lowered it to 4.125% two years ago. But when I asked them if there would be a similar fee to do it again, she just said “nope, we’re waiving that fee right now”. I still would have modified the loan even if I had to pay the fee again. I did the math the other day and this modification will save us over $4,000! :D

  4. says

    I haven’t been able to get a lower rate on our primary loan (at least, not without a re-fi)…but for our HELOC with Union Bank, we can adjust the rate & term every 12 months. We just call them and if the current rate is less than what we currently have, we can just lower it to the current rate (we can choose to re-set the term, or just set the rate). They email over a 1 page addendum for us to sign….easy peasy!

  5. MaryBeth says

    I had the same sort of situation with our car loan. I called the credit union when I saw their rates for new loans were 2.89% instead of my 6.99% I asked to take out a new loan to pay off my old one. I thought it would take some work on my part to apply for a new loan, but I thought it would be worth it to save 4.1%. All it required was my signature on a form for agreeing to the new loan terms. Easiest money saved ever!

    • Nichole D. says

      Hi MaryBeth, My husband and I did something similar in June. We refinanced his truck from 6% down to 2.99%!! I was so happy. We kept the same payment but shaved almost $1,000 off in interest. In less than 4 months our last credit card will be paid off and then we’re snowballing that payment onto the truck payment. Fingers crossed we’ll be free of all debt (except house) in less than a year. :)

  6. says

    We had to refinance (and pay to do so) – which we did last spring. We were so excited to lower not only our interest rate, but the number of years on our loan! We started out with a 30-year loan and then roughly 7 years later refinanced to a 15-year loan. It raised our monthly payment but it’s exciting to see the principle being paid at a more aggressive rate! :)

    • Amy f;) says

      that’s the same as us too:) Its hard though, because all of a sudden everything around the hosue is breaking and I didn’t calculate for all those housing costs when I decided we could budget to spend more on housing each month. oops.

      • says

        Amy, I guess that’s part of home-ownership! We’re replacing two wood-frame windows with the money that we were saving for a couch set, the washing machine and furnace both needed repairs within the last month, and…so forth. :)

  7. says

    We just got a letter from our mortgage company last week saying we could refinance for almost two percentage points lower with no closing costs. When I called and asked the consultant what the catch was to this, she basically said that with rates so low, so many people are refinancing, that the mortgage company is offering this to good customers so we don’t take our loan/business somewhere else. The paperwork is in the mail, and we should be refinanced into lower payments soon!

    • Stephanie says

      And the closing costs aren’t rolled into the loan? Our credit union is offering something similar but the catch is that the closing costs aren’t paid upfront, but they are added on to the loan.

      I think I will give my credit union a call again to see if there’s any other opportunities to take advantage of. Such a great tip!

      • Chris says

        Stephanie, when you call your credit union try asking specifically if a “modification” is available. A “refinance” often has the closing costs you are encountering, but a modification doesn’t. My first modification just had a small fee and the second time there was no fee at all. Good luck! :)

    • Nichole D. says

      Is it a streamline loan? We did one last January and dropped our rate from 7% to slighlty less than 4%. We had to pay a few hundred dollars out of pocket for escrow. Yes we were young and stupid and bought a house with 0% down and now have PMI. :(

    • robyn says

      we got a similar letter early this summer; our mortgage was through Chase and we expected there to be tons of fees, but there weren’t. we went for it and they paid everything (i recall there being mention of grant money to do these refinances). we were greatly surprised, no fees rolled into the loan or anything and we lowered our interest rate to 2.9%. we had a decent interest rate of 4% i think so we figured if they wanted us to foot the refinance bill we’d walk away. all we paid for was the notary (very small fee and only because we were out of state and had to use their person). surprisingly we had moved out of state (to be with extended family) and the house with the mortgage was vacant and for sale and they still honored the lower rate. we saved over $300 per month and didn’t’ have to pay the first month after the refinance. we sold the house after 3 months of the refinance. worked out to be a fantastic deal for us.

  8. says

    Our credit union lowered our rate in the same manner. We had about 5 years left on a 15 year mortgage at 4.75%. When I called I was originally going to see if we could “refinance” but with a Home Equity Loan. I had heard you could do this when you have a low balance and that usually the banks will waive the fees. Anyway, the credit union offered a no-cost loan modification instead. It lowered the interest rate to 3.5% without any fees. We have the same time left on the loan but the payment went down $350. We plan to continue making our old payment amount and retire the loan that much sooner! I was told they are doing this because there is so much competition and they don’t want to lost the customer.

    • Nichole D. says

      Rebekah I also have an FHA loan, but we were able to do a “streamline refi” last January with our mortgage company (Nationwide). We paid a few hundred dollars (approx $200). I also have PMI. :(

      • Rebekah Williams says

        I get letters in the mail all the time with those. I didn’t ask about it but the rep I talked to made it sound like if I refinanced and had an FHA loan reissued, I’d practically lose money because PMI rates have doubled since I last got my loan. We don’t have more than a few hundred dollars to bring to this and don’t really want to roll costs or extend the length of our loan.. Maybe I need to call again and try to get someone else.

    • Jen says

      Rebekah, we had a FHA loan with PMI as well. We looked at many, many options for geting in on the lower interest rates. Ours was 6%, and we were roughly 9 years into a 30 year mortgage. When we called our mortgage company (Wells Fargo) to ask if there was any way they could help, we learned about a streamline mortgage.

      It’s a program available for FHA loans. We went from 21 years left at 6 % to 20 years at 3.75%, and it lowered our payment by $100 per month. There was no inspection, and they sent a notary to our home to finalize all the paperwork. We even received a check in the mail for $75.75 about 10 days after we finalized everything. Best of all, we couldn’t have done it at a better time (end of November), because the new payment begins in January, with NO mortgage payment in December. Normally, I would make the payment anyway, but things have been tight, and we decided to take the money budgeted for the mortgage payment and use it for Christmas. I will make 2 extra payments with my husband’s 3 paycheck months in the coming year, instead.

      You should look into a streamline mortgage.

      • Jen says

        I believe we still have PMI as well. My husband owned the house before we married, so he handled all the details. This may not be the best deal out there, but for us the fact that we shaved a year off the morgage, reduced our payments by $100/month, and didn’t have to pay one penny to do it, made it well worth it.

      • Nancy says

        We had a similar experience, we not only were able to lower the interest rate on a primary home we did the same thing with our rental home. Our primary home went from 5% to 3.75 % and NO fees, the lender paid everything and we received a small refund of the the lender paid fees. We are saving $160 month in payments and over $50,000 in interest. This was a streamline loan, I never had to leave my house everything was handled via the phone and internet and a notary was sent to our home for the signing. Our PMI did go up, but only about $10 a month and only for 5yrs and then it is gone. :)

        On our rental home, we had to pay fees, the lender roughly 1/3 of our fees, but we went from 7% to 3.75 and payment went down over $200 a month. Even with the fees and the extra year we were 11 yrs into a 30yr loan and went to a 20 yr loan), we are saving over $40,000 in interest. Again, we never had to leave our home to do this.

        I highly recommend checking into streamline a loan if it is FHA. Rates are low and the process is easy.

        • Jen says

          Awesome, Nancy! That’s it how worked for us too. Everything was handled over the phone and through email, until the lender sent the notary to our home to finalize. We didn’t pay anything either. By my calculations, we’re saving $33,000 over the life of the loan, when I add the $100 reduction per month and the full year of payments we eliminated. It was definitely a great decision for us.

      • Nichole D. says

        Jen: Yup that sounds exactly like what we did last year. The notary came to our house also for the closing. It was all really painless and lowered our mortgage payment by $200+ a month. We decided to put the “extra money” towards our credit card debt and then we’ll go back to making the mortgage payment that we were making before refi. Worth looking into for sure!

    • Rebekah Williams says

      Did you all refinance with your original lenders? I am not getting a deal out of mine just yet, so I’m wondering who would be good to try next. :) We don’t know how long we are staying here so I don’t really want to pay gobs of money in closing costs.

      • Jen says

        We did the streamline refinance through the original lender. Maybe you can google it and get more info. I think it’s a government regulated program, but I’m not sure what the specific requirements are. Good luck!

      • Nichole D. says

        Yes! The original lender (Nationwide) actually called us to let us know about the refi option. It may have been a special program for people with FHA loans or we only qualified because of the FHA loan, not sure. Worth checking with your current mortgage company. Good luck!! :)

  9. Joan says

    Banks in our area are offering an ‘express refinance’. For $250 fee/closing cost you can do s modified refinance. Only 2 weeks to close. There are rules: 12 year maximum, max amount of loan (I forgot ceiling being it didn’t affect us ), and a debt to loan ratio. May be a good option to ask about.
    Tradition refi did not work for us as ‘we did not owe enough’. (That what the loan officer said)!

  10. Jenny W says

    What a great idea – all they can do is tell you no, right? I just emailed my company today – thanks for the tip!

    • Chris says

      Jenny, just an FYI, you may not get anywhere with an e-mail. I tried that first and received a response saying they could not discuss my mortgage by e-mail, I had to actually call.

      • Jenny W says

        I’ll watch my email – I have no qualms about calling them up, but I love email. Had to start there!

  11. coupon woman says

    We were also able to refinance for free and lower our interest rate almost 2% (from 5 something to 3 something). Just some paperwork and a few dollars out of pocket for notary signatures. We lowered our monthly payments and shortened about 6 years off our loan term!

  12. jennifer says

    We’re refiying (is that a word;) this month for nothing- by calling our bank too. Other banks I called offered 1700 for refinancing.

  13. Sarah says

    Just tried this today. They said we were not delinquent in our mortgage, so they would not renegotiate unless we put $20,000 down. I’m wondering if we switched to a smaller credit union if they would help more. I’m going to start calling around. Thanks for the idea :)

    • Chris says

      Sarah, I’ll bet you’re with what Clark Howard would call a “Monster Mega Bank”. I’m sorry to hear they are not being cooperative. Yes, that’s an excellent idea to check the credit unions. They are MUCH more helpful! Good luck, I hope it works for you! :)

  14. Lea Stormhammer says

    We just did this too. From 6.25% to 3.25% – we modified our current load not refinanced. We’re with one of the biggie companies and the paperwork is in the mail. We are 6 years into a 30 years. If we modified the current loan we didn’t have to pay extra. If we refinacned to a new 30 year we could have gotten a lower rate but had to pay charges. Since our goal is pay the house off so we can go where the Lord calls us when my husband is done with seminary in 3 years, we took the option to modify.

    This shaved over $300 off our monthly payment. Paying that back toward the principle will get us toward our goal much quicker than we can possibly imagine!

    Lea

  15. Emily says

    We have an adjustable rate mortgage that we got almost 9 years ago at I think 6% but maybe 5%. The maximum it can ever go up to is 9% (but only can increase 1% per year). It has consistently gone down every possible chance and now is at 2.875%. I know some people don’t recommend this type of mortgage, but it has worked very well for us. And I pay an extra $300 a month because our mortgage is so low which helps a ton.

  16. says

    I may have to try this.

    We are 7 years into a 30 year mortgage and underwater on our loan. We were just talking to Quicken Loans about refinancing. Apparently we qualify for Fannie Mae’s Making Homes Affordable Program (or a name to that effect). We’re currently at 6.875%, and they would bring us down to 3.99%. However, we’d have to pay about $3,500 in fees (rolled in the loan). That seems like a lot.

    Does anyone care to share how much fees were for their refinance? I am thinking it might be better to stick with our current loan and just continue to pay a little extra each month.

  17. Caroline says

    Two years ago, they called us!! They said that we could pay a little more and switch to a 15 year, instead of a 30 year, or lower our payment and keep the 30. I couldn’t believe it, so we didn’t do it. Then they called 6 months later and offered a 15 year for $3 less than our current 30 year. I mean really??? I kept asking what the catch was. But there really wasn’t one. No closing cost or appointment even. They said that they didn’t want us to take our business elsewhere. I took it as a blessing directly from the LORD, especially since I didn’t have the intiative to do it on my own.

    • WilliamB says

      There’s a benefit to the lender but it’s not a catch from your perspective. Rates have gone down a lot in the past couple of years and the bank doesn’t want to lose profitable customers. Also, banks don’t want to annoy the bank overseers right now, since so many big banks are in trouble for questionable mortgage practices in the recent past.

      It’s still possible that a bank would slip a trick, such as high fees rolled into the loan amount, btw. It’s still a good idea to read everything, etc.

  18. Ashley says

    Has anyone tried this with chase bank? We initially did a rural development loan and then chase bought our mortgage. We pay no PMI.