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With mortgage interest rates falling, homeowners are hunting for ways to cut their monthly payments. Refinancing remains hugely popular, but a lesser-used hack could also save you hundreds each month: mortgage rate modifications.
The best part? All you have to do is ask.
The average rate on a 30-year fixed mortgage is 6.21% as of December 18, 2025, down down from over 6.74% in December of last year (1).
With this in mind, homeowners can ask for a mortgage rate modification. This is an agreement between a borrower and their lender to adjust the interest rate on a loan without a full refinance.
Unlike refinancing, which involves replacing your existing mortgage with a new one (often with different terms and costs), a rate modification simply alters the interest rate of your current loan, lowering monthly payments and reducing interest over the life of the loan.
Mortgage rate modifications are typically associated with loan modifications designed to help borrowers avoid default or foreclosure. Some lenders offer rate modifications proactively to retain good customers when market rates drop. But do you really want to wait for the lender to make the first move?
Before approaching your lender, understand your existing loan terms, including the interest rate, remaining balance and any clauses related to modifications or prepayment penalties.
You can also benefit from researching rates before you decide whether a modification or refinancing is the better move for you.
For example, according to research from Freddie Mac, borrowers who approached different lenders and got two or more quotes saved between $600 and $1200 annually compared to people who refinanced their mortgages from their current lender. Over the lifetime of your mortgage, this number can add up to substantial savings.
Knowing the current mortgage rates will strengthen your position when negotiating with any lender.
If you then decide that a rate modification is the right move, your next step is to contact your loan officer or customer service representative to explore what’s possible. Be ready to demonstrate your good credit score and consistency with on-time payments, since lenders are more inclined to accommodate reliable borrowers.
Finally, it’s time to negotiate terms. Be prepared for rejection. After all, the lender has its agreement and isn’t obligated to change the terms. But if your lender is open to it, be ready to discuss possible fees associated with the modification. While some lenders may charge a nominal fee, it’s often significantly less than the costs associated with refinancing.
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Though interest rates are dropping they remain relatively high, so homeowners with mortgages locked in at higher rates stand to benefit significantly from a lower rate. The typical costs and hassles associated with refinancing — closing costs, appraisal fees, and extensive paperwork — are enough to send anyone looking for something better.
A rate modification gets around many of these hurdles. Since you’re merely adjusting the terms of the existing loan, the process is usually faster and cheaper, and involves less paperwork.
Obtaining or making changes to your mortgage can have long-term implications so it might be worth talking to a financial advisor to create a plan or find out all of your options depending on your goals.
If you need help finding one, Advisor.com connects you with vetted fiduciary financial advisors near you. All you have to do is answer a few simple questions about your finances, and Adivsor.com matches you with a certified expert that matches your needs and situation.
You can then set up a free consultation — with no obligation to hire — to see if they’re the right fit for you.
Here’s why it’s worth asking your lender.
Suppose you have a $300,000 mortgage with a 30-year fixed rate at 5%. Your monthly principal and interest payment would be approximately $1,610. If market rates drop and your lender agrees to modify your interest rate to 4%, here’s how the numbers change:
New monthly payment: Approximately $1,432
Monthly savings: $178
Annual savings: $2,136
While typically lower than refinancing costs, some lenders may charge a fee for modifying the loan. Ensure that the savings outweigh any expenses.
Secondly, confirm that other loan terms remain the same. Some lenders might try to adjust other aspects of the loan during modification. Also, unlike refinancing, a rate modification generally doesn’t require a hard credit check and shouldn’t affect your credit score.
To sum up, refinancing can be more expensive than you think. On average, the total cost of refinancing can range from 2-6% of the total loan amount.
If you are thinking about buying a house now with hopes of refinancing in the future, it might not be the bargain you think it is. Rather, you might save substantially just by doing some research to try to get the best possible quote on your new mortgage.
According to a report from LendingTree, shopping around for a mortgage can help you save an average of $76,410 over the lifetime of a 30-year fixed-rate loan.
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Federal Reserve Bank of St. Louis (1)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
