How To Lower Your Mortgage Payment

Written by Rene Bermudez +1 more

Edited by Crissinda Ponder

If you’re wondering how to lower your mortgage payment, the most common way is to refinance your home loan. But if you’re looking to avoid refinancing, don’t worry — there are several ways to reduce your monthly mortgage payment without altering your current loan. 

We’ll explain the options and help you find a strategy that fits your situation.

Overview: How to reduce your mortgage payment

No matter your situation, there are several levers you can pull to reduce a mortgage payment, which include your interest rate, loan term and homeowners insurance premiums.

Step one in lowering your mortgage payment is to figure out which of these levers is most in reach and makes the most sense for your financial plans. Below, we’ll cover nine strategies that manipulate these factors in different ways.

If you’re wondering how to lower your mortgage payment without refinancing, skip ahead to strategy No. 5.

1. Refinance to lower your interest rate

How it works: A mortgage refinance involves replacing your current mortgage with a new one, giving you the chance to lock in a lower interest rate. But a lower interest rate isn’t a given — to access a lower rate you’ll typically need to improve your credit score or wait for interest rates to drop. 

Who it’s best for: Existing homeowners who can afford refinance closing costs (usually 2% to 6% of your loan amount) and have plans to remain in the home past their break-even point.

Loan options: There are several refinance options that require the full vetting process you underwent when you first bought your home. The lender verifies your income and credit and requires a home appraisal to determine your home’s worth. There are also “streamline” refinance options that allow you to skip the income documentation and appraisal process: 

Use LendingTree’s mortgage refinance calculator to estimate how much you can save based on current interest rates.

2. Refinance to get rid of mortgage insurance

How it works: If you made less than a 20% down payment on a conventional loan or took out an FHA loan, you’re likely paying for mortgage insurance. You could easily be paying hundreds of dollars monthly toward mortgage insurance premiums, depending on your down payment amount and credit score when you bought your home. 

The good news is you can get rid of or reduce your monthly mortgage insurance costs. Here’s how:

Who it’s best for: Existing homeowners whose current loan is an FHA or conventional loan, and who can afford to pay refinance closing costs and have plans to remain in the home past their break-even point.

This strategy is also good for homeowners who are within striking distance of that 80% LTV ratio. If they have access to enough cash to put them over the finish line when they refinance, they can put those funds toward the new mortgage.

3. Refinance into a loan with a longer term

How it works: A 15-year mortgage can be a great option if your goal is to pay off your loan faster or save on lifetime interest charges, but it will always come with a higher mortgage payment than a comparable 30-year mortgage. 

If your current payment is putting too much pressure on your budget, refinancing to a 30-year mortgage will give you some relief. If you’re fretting about all the extra interest you’ll pay over time, take heart: You can always make additional payments later if your income increases or you receive cash windfalls like tax refunds or work bonuses. 

Who it’s best for: Existing homeowners with a 15-year mortgage who can afford refinance closing costs and plan to stay in the home past their break-even point. 

4. Refinance to an adjustable-rate mortgage

How it works: An adjustable-rate mortgage (ARM) offers a lower rate for a set time, typically between one and 10 years. Those years can be a big relief if you need to temporarily reduce your mortgage payment. Just be sure you understand how the ARM will adjust and have a plan for handling future monthly payment increases. 

Who it’s best for: 

Loan options: Both conventional and FHA ARM loans come with one-, three-, five-, seven- and 10-year options. VA lenders offer three-, five-, seven- and 10-year ARM loans.

Read more about 5/1 ARMs, 5/5 ARMs or ARM refinance loans.

5. Get a mortgage recast

How it works: If you’re looking for a way to lower your monthly mortgage payment that doesn’t require refinancing, you may want to explore a mortgage recast. You’ll need a lump sum of cash to spare, usually at least $10,000. 

You’ll use that extra cash to pay down your loan balance, and the lender will then recalculate the payment based on your current interest rate and the original loan repayment term.

Who it’s best for: Existing homeowners who have a lump sum of cash available for any reason. Often this is a good option for those who had to buy a new home before they sold their old home, but now have the profit from their old home to pay down their mortgage and reduce their monthly payment amount while skipping the refinance process.

6. Shop around to save on homeowners insurance

How it works: It’s not uncommon to see your homeowners insurance premiums rise every year, but you’re not required to stick with your current carrier if you can find the same coverage elsewhere at a lower price. Comparing insurance quotes is easy with LendingTree: you can enter your information once and sit back while multiple companies compete for your business. 

Who it’s best for: Anyone who feels like they’re paying too much for homeowners insurance and is willing to switch away from their current provider.

7. Dispute your property tax bill

How it works: If your home loan includes an escrow account, property taxes may make up a considerable chunk of your monthly mortgage payment. As a homeowner, you can appeal a tax assessment with your local, county or regional tax board. Common reasons to appeal are errors in square footage, zoning or amenities. 

Consult with a tax attorney to learn more about the process and deadlines for a local property tax appeal.

Who it’s best for: Homeowners who suspect that their tax assessment has errors, or those who can qualify for a property tax exemption. For instance, if you’re a senior or have a disability, you may be eligible for one.

8. Rent out part of your home

How it works: If you have an extra bedroom, basement or addition to your home, renting it out can help you afford your mortgage payment. The extra money can create room in your budget to build an emergency fund, pay down credit card bills or cover other expenses. 

Strictly speaking, you won’t be reducing your monthly mortgage payment, but offsetting the cost with rental income (a strategy sometimes known as house hacking).

Who it’s best for: Homeowners who want to avoid a refinance and are open to being a landlord.

9. Get a loan modification

How it works: If you’ve recently faced a major life event that has affected your ability to make your mortgage payment, you may be eligible for a mortgage modification. Modification options may include: 

You typically aren’t eligible for a mortgage modification unless you’ve missed a few mortgage payments. To check your eligibility or get the ball rolling, reach out to your mortgage lender.

Who it’s best for: Homeowners who are experiencing financial hardship that’s long-term or permanent, like a serious illness, natural disaster, divorce or the death of a primary wage earner.