10 Proven Ways to Reduce Your Mortgage Payments

1. Refinance to a Lower Interest Rate

If interest rates have dropped since you got your mortgage, refinancing could significantly lower your monthly payment. Even a 0.5% reduction in interest rate can save hundreds per month on a large loan.

Use our mortgage calculator to compare your current payment to what you might pay at a lower rate. Keep in mind that refinancing comes with closing costs (typically 2-5% of the loan), so make sure the savings outweigh the costs.

2. Extend Your Loan Term

Refinancing from a 15-year to a 30-year mortgage will lower your monthly payment significantly. The tradeoff is that you will pay more interest over the life of the loan, but this can provide immediate relief if you need lower monthly payments.

3. Remove Private Mortgage Insurance (PMI)

If you put less than 20% down, you are probably paying PMI, which can add $100-$300 or more to your monthly payment. Once you have 20% equity in your home, you can request PMI removal from your lender.

Home values have risen significantly in many areas. If your home has appreciated, you might already have 20% equity even if you did not start with it. Get an appraisal to find out.

4. Appeal Your Property Tax Assessment

Property taxes are often included in your mortgage payment through escrow. If you believe your home is over-assessed, you can appeal to potentially lower your tax bill and monthly payment.

Research comparable home sales in your area. If similar homes sold for less than your assessed value, you may have grounds for an appeal.

5. Shop Around for Homeowners Insurance

Like property taxes, homeowners insurance is often included in your escrow payment. Insurance rates vary widely between companies, so shopping around annually could save you hundreds.

You can also reduce premiums by raising your deductible, bundling with auto insurance, or asking about discounts for security systems, smoke detectors, or being claim-free.

6. Make One Extra Payment Per Year

This does not lower your monthly payment immediately, but making one extra principal payment per year can shave years off your mortgage and save tens of thousands in interest.

An easy way to do this is to divide your monthly payment by 12 and add that amount to each monthly payment. You will make the equivalent of 13 payments per year without feeling a big hit to your budget.

7. Switch to Biweekly Payments

Instead of paying monthly, pay half your mortgage every two weeks. Since there are 52 weeks in a year, you will make 26 half-payments, which equals 13 full payments instead of 12.

Check with your lender first, as some charge fees for biweekly payment programs. You can often achieve the same result for free by simply adding extra principal to your regular payments.

8. Recast Your Mortgage

If you come into a lump sum of money (inheritance, bonus, etc.), you can make a large principal payment and then ask your lender to recast your mortgage. This re-amortizes your loan with the new, lower balance, reducing your monthly payment.

Recasting typically costs $150-$500 and is much cheaper than refinancing. Not all lenders offer this option, so check with yours.

9. Request a Loan Modification

If you are struggling financially, contact your lender about a loan modification. This can lower your interest rate, extend your term, or even reduce your principal balance in some cases.

Loan modifications are typically reserved for borrowers experiencing genuine hardship, but it is worth exploring if you are having trouble making payments.

10. Rent Out Part of Your Home

If you have a spare room or basement apartment, renting it out can offset your mortgage payment. Even renting on Airbnb occasionally can help cover costs.

Check local regulations and your HOA rules before renting. You will also need to report rental income on your taxes, but you can deduct related expenses.

What You Can Save

Let us look at a real example. On a $350,000 mortgage at 7% over 30 years, your monthly principal and interest payment is about $2,329.

• Refinancing to 6%: Saves $231/month ($83,160 over 30 years)
• Removing $200/month PMI: Saves $200/month
• Lower insurance by $600/year: Saves $50/month

Combined, these changes could save nearly $500 per month!

The Bottom Line

Lowering your mortgage payment takes some effort, but the savings can be substantial. Start with the easiest options like shopping for insurance, then consider refinancing if rates are favorable.

Use our mortgage calculator to see how different scenarios affect your monthly payment and total interest paid.