What do you know about simple mortgage loan modification?

[Pinkleaf]

Several months ago I asked advice about refinancing our mortgage & combining a Helco that we used to purchase a rental.  Initially had decided to roll them together because the interest savings would greatly make up for the loss of the tax write off on the rental interest and we are planning to sell soon. (I figured to recoup the charges in abt 4 months). After doing some work on the house to ready it for the appraisal, I finally went to the bank a couple of weeks ago.  After a pretty lengthy discussion of what I was trying to achieve, the loan officer offered to just reduce our present interest rate. Totally shocked as I never thought this was an option at all.

$500 fee, no credit check, no appraisal (I'm almost irritated, lol), no change in length of loan, no early termination fee, just a 2% reduction in the interest rate.

We have excellent credit and a long time customer of this small local bank.  My best guest is he knew I would shop around and would probably find a better interest rate than what they offered.  I never told him we were planning on selling our home, but did indicate interest in purchasing another rental.

With the payment I'm making now, the mortgage will payoff in 68 months. The modification is supposed to reduce the required payment approx $94.  I haven't been able to find anything online about this type of modification and am anxious to play with my spreadsheet.  Does anyone know how this type of modification if figured?  Will they just change the interest rate on the day we sign? 

Any comments are greatly appreciated!

[GoatStache]

I don't know about the modification, I would imagine that the modification would occur on the next payment after signing.

I would shop around anyway to see what your options are. Did the bank give you a deadline on accepting their modification? Personally I'd want to have all of the numbers in front of me.

[Mother Fussbudget]

If the bank (or an individual) owns the note, they can modify the terms however they please.  You should shop around, but it sounds like you're happy with your current bank, and if the $500 fee works out on paper (with the 2% interest rate reduction), you should consider taking it.  I would do it to save the hassle & paperwork you're going to have with a new loan.

[Drifterrider]

$500 fee, no credit check, no appraisal (I'm almost irritated, lol), no change in length of loan, no early termination fee, just a 2% reduction in the interest rate.

The holders of the mortgage can reduce the interest rate.  This used to be called a "streamlined" refinance but I don't know if that term is used anymore.

They are reducing your rate for a nominal fee probably, because they know you are credit worthy and want to keep your business.  Go for it.

[Pinkleaf]

Thanks guys!  I have heard the term streamlined before and I feel much more at ease.  I don't remember the loan officer using that word but I'm sure that's what it is.