Question:
“We’d like to refi and get our rate down, but we’ve had this loan 10 years. So we just have 20 years left and don’t want to start over on a 30 year loan. Is there a way to get our current lender to just lower the rate or refinance the loan in place?”
Answer:
I have the old bad news / good news scenario for you…
- Bad: Banks won’t do what you requested.
- Good: You can accomplish your ultimate goal anyway.
There’s a common misconception that refinancing forces you to start over on a new 30-year loan term. Hand in hand with that is the flawed worry that you’re losing a loan with a lot more of the payment going towards decreasing the principal loan balance.
There are two ways to refinance and not be stuck paying another 30 years on your mortgage.
#1: Refinance with a 15- or 10-year mortgage. The shorter the loan, the lower the fixed rate you can get. I just refinanced one of my rentals from a 30-year mortgage (with 27 years to go) to a 10-year mortgage. The payment is higher, but we got a GREAT rate and obviously will pay the loan a heck of a lot faster.
#2: If you want the flexibility of not having higher payments locked in, get another 30-year mortgage. Because you’re stretching out the life of the loan and have a lower rate, your payment is automatically lower. This gives you the option to painlessly pay more on the principal every month. Go online or ask your lender to create an “amortization schedule” showing how much extra principal to pay per month to pay your loan off in your preferred time frame.
If you need the name of a great lender, call or email me.
