When thinking about refinancing, always start with your current lender. Should your original lender still be servicing your loan (meaning that it hasn't been sold off in the secondary market to, say, Freddie Mac or Fannie Mae), you just might be able to do a "loan modification," says Keith Gumbinger, vice president of HSH Associates. Granted, the likelihood of this happening is not great, but a "loan mod" is by far the cheapest and easiest way to alter your mortgage, so it's worth asking about.
As the name implies, a loan modification is simply an adjustment to your current mortgage. Should you be eligible, your lender would modify your loan by issuing a new rider allowing you to pay a lower interest rate for the remainder of your term. There's very little paperwork involved and very little cost — usually this can be done for a couple hundred bucks.
These days, loan mods are most commonly used for customers who are experiencing severe financial problems (as a means of avoiding bankruptcy), explains Bud Carter, senior director of residential finance at the Mortgage Bankers Association. But in some cases, this might also be considered as a means of retaining a stellar client.
That said, if you have a conforming loan (i.e., one that's below $275,000) and if you've lived in your house for at least a couple of years, chances are your loan has been sold off. If that's the case, consider instead a "streamlined" mortgage. This is a quick, simple and cheap way to refinance your loan, and most major lenders, including Bank of America, Wells Fargo and Countrywide offer some form of it.
The paperwork required with a streamlined mortgage is considerably reduced, and often certain requirements, like an appraisal and application fee, are waived, saving you time and money.
Of course, there are a couple hurdles you're going to have to jump over to be eligible for a streamlined refi. For starters, this service is typically only available to people who want to refinance their mortgage for the amount remaining on their current loan, Carter explains. You also typically need to have flawless credit, so if you've recently missed a few payments on your credit cards, or even just changed jobs, you're probably out of luck. Finally, some lenders offer this service only to their current customers.
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