We get calls all the time from people that are moving toward retirement and they are trying to scale their budget down by reducing the amount of their monthly mortgage payments. What many loan officers don’t tell you is that you don’t necessarily have to refinance your mortgage in a situation like this to reduce your monthly payments. Obviously if your current interest rate is high, completing a refinance into a lower fixed rate would make sense.
If your current rate is competitive, what you want to seek out with your existing loan servicer is what’s called “a loan re-cast” or “recasting your existing loan balance”. Most loan servicing companies will offer this at least once in the lifetime of a mortgage. What this means is that you give the lender the large principal payment and then the lender takes the new principal balance and re-calculates your principal and interest payment based on the note rate and remaining term on your loan. They re-cast the principal balance over the remaining term.
There is usually a fee to do this of $250-$350, but this is much less than you will pay to refinance and you get to keep your current rate.