Smart Steps: Tips That Will Lower Your Mortgage Payment

Every homeowner welcomes the opportunity to save money, and lowering your mortgage payment is a great way to keep more cash in your pocket each month. Whether you're looking to free up some extra funds, find relief from financial strain, or make room in your budget for other expenses, there are several strategies that can lead to a more manageable monthly payment.

Let’s explore some of the most effective methods to lower your mortgage payment and make homeownership more affordable.

1. Refinance Your Mortgage

One of the most common ways to reduce your monthly mortgage payment is refinancing. By replacing your existing loan with one that has a lower interest rate or longer term, you can significantly cut your monthly bill.

Types of refinancing to consider:

• Rate-and-term refinance: Lower your interest rate or extend your term.
• Cash-out refinance: Tap into home equity to consolidate debt and reduce total payments.

Tip: Shop around and compare lenders. Even a 0.5% drop in rate can save thousands over time.

2. Eliminate Private Mortgage Insurance (PMI)

If your original down payment was less than 20%, you're likely paying PMI. Once your loan-to-value (LTV) ratio reaches 80% through payments or increased home value, you may be able to request cancellation.

Steps to remove PMI:

• Order a home appraisal to prove sufficient equity.
• Submit a formal request to your lender.
• Ensure good payment history.

Removing PMI can lower your payment by $100–$300 per month, depending on your loan size.

3. Recast Your Mortgage

Mortgage recasting is an often-overlooked strategy that allows you to reduce monthly payments by making a large lump-sum payment toward your principal. Unlike refinancing, the loan terms remain the same, but your payments are recalculated based on the new balance.

Benefits:

• No need to qualify or pay high closing costs.
• Can significantly lower monthly payments.

Ask your lender if your loan qualifies for recasting and if they charge a recasting fee (typically $150–$500).

4. Extend the Loan Term

Extending your loan term, such as moving from a 15-year to a 30-year mortgage, will reduce your monthly payments, though you’ll pay more in interest over time.

Ideal for:

• Short-term financial relief
• Those planning to sell or refinance again later

Example: A $250,000 loan at 6% for 15 years is ~$2,110/month. The same loan over 30 years is ~$1,500/month.

5. Shop for Lower Homeowners Insurance

Since your monthly mortgage payment includes escrow for taxes and insurance, reducing your homeowners insurance can shrink your total payment.

Tips to lower insurance costs:

• Bundle with auto insurance.
• Raise your deductible.
• Shop around annually.

Even a $500 annual reduction in insurance can cut over $40 from your monthly payment.

6. Appeal Property Taxes

Overassessed home values lead to higher property taxes. Review your tax assessment and appeal if your property is valued too high.

Steps to appeal:

• Research comparable property values.
• File appeal through local tax authority.
• Hire an appraiser if needed.

Lower property taxes translate directly into lower monthly payments if your taxes are escrowed.

7. Consider a Loan Modification

If you're struggling financially, your lender might offer a loan modification—changing the terms of your mortgage to reduce the payment without refinancing.

Possible modifications:

• Lowering the interest rate
• Extending the loan term
• Forbearance or deferment options

This is particularly useful if you’re facing hardship and don’t qualify for refinancing.

8. Rent Out Part of Your Home

If you have an extra room, finished basement, or garage apartment, consider renting it out to supplement your mortgage payment.

Platforms to consider:

• Airbnb for short-term guests
• Craigslist or Facebook Marketplace for long-term tenants

Make sure you comply with local zoning laws and lease regulations.

9. Make Biweekly Payments (Long-Term Strategy)

This won’t immediately reduce your payment, but making biweekly payments (half the mortgage every two weeks) results in 13 full payments per year, helping pay off your loan faster and reduce interest over time.

Benefits:

• Accelerated loan payoff
• Reduced total interest
• Better amortization effect

Final Thoughts

Reducing your mortgage payment isn’t just possible—it’s practical. Whether you're planning to refinance, drop PMI, or make small strategic moves like improving your insurance policy, each step can bring meaningful financial relief.

As a mortgage professional, I encourage you to assess your options carefully, consult a financial advisor when needed, and take proactive steps toward managing your loan smarter.

FAQs

1. Will refinancing hurt my credit score?
Yes, temporarily. Credit inquiries may slightly impact your score, but responsible refinancing usually improves your long-term financial health.

2. Can I remove PMI without refinancing?
Yes. Once you reach 20% equity, you can request PMI removal from your existing lender.

3. Is recasting better than refinancing?
It depends. Recasting is cheaper and easier if you have a lump sum. Refinancing may yield better rates but comes with closing costs.

4. Can I appeal my property taxes every year?
Yes, though procedures vary by locality. Check with your local assessor's office.