How to Refinance the Interest Rate on a 30-Year Fixed Rate Mortgage
The interest rates on 30-year fixed-rate mortgages sank to record lows throughout much of 2009 and remained low as 2010 began. It's little surprise, then, that many homeowners have sought to refinance their 30-year mortgage loans to take advantage of these lower rates. By dropping the interest rate on a 30-year loan from 6 percent to 5 percent, you can reduce your monthly mortgage payment by more than $100 (depending on the size of your loan).
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Things You'll Need
- Copy of your most recent mortgage statements
- Your last two federal income tax returns
- Copy of your savings account statement
- Copy of your checking account statement
- Copies of your credit-card and other loan statements
Instructions
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Knocking Down Your Interest Rate
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1
Gather the financial paperwork that your lender will use to verify your income and debts. Lenders are more likely to approve a refinance on your 30-year mortgage loan if you have a high income and a low amount of debt. You'll need copies of your two most recent federal income tax statements, your savings and checking account statements and your credit-card and other loan statements. You'll also need a current copy of your mortgage statement so that you can tell your lender how much you owe on your 30-year loan.
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2
Call your mortgage lender. It's best to use the number included on your most recent mortgage statement. Ask to speak to a loan officer about a refinance.
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3
Give the loan officer a brief report on your financial status and how much you owe on your home. This will help the loan officer get a rough idea of how likely a candidate you are for a refinance.
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4
Give the lender permission to run a credit check on both you and any other co-borrowers, and send an appraiser out to determine the value of your home. Your lender will be more likely to approve you for a refinance if your credit score is high--usually 720 or above. It's also important that the appraiser values your home high enough. If it has lost value over the years you might not qualify for a refinance; lenders need you to have a certain amount of equity in your home before they can sign you up for a refinance.
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5
Send in the financial paperwork that you gathered in step 1. The lender will review this to confirm your monthly income and debt levels.
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6
Wait for an approval. Agree to a closing date for the refinance if your income levels are high enough, you have a solid credit score and your home has appraised at a high enough value.
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7
If your current lender does not approve you for a refinance, you can call other lenders and apply with them. Any lender can handle your refinance; you are not limited to the lender who is currently holding your 30-year mortgage loan.
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Tips & Warnings
If you are a homeowner who is underwater--meaning that you owe more money on your mortgage loan than the home is worth--you will struggle to obtain a refinance of your 30-year mortgage. However, if you don't owe much more than what your home is worth, you might find some lenders willing to take on a refinance. This requires making a lot of calls.
