How to Lower Your Monthly Mortgage Payment

6 ways to lower your mortgage payment

Whether you just need a bit more room in your budget or are facing financial hardship due to illness, job loss or another crisis, there are several ways to reduce your monthly mortgage payments. Here are some of the most common strategies, from refinancing to applying for government assistance.

Refinance your home

A popular way to lower your monthly mortgage payment is to refinance to a lower interest rate or longer term. This is especially helpful if you are switching from a 15-year mortgage to a 30-year mortgage or if you qualify for an interest rate that is 1% or more lower than your current rate. Refinancing is also helpful to get out of an adjustable-rate mortgage (ARM), which can be costly when rates go up.

Refinancing is technically getting a new home loan, so you will have to pay loan origination fees and appraisal fees. Your loan will also reset for the term at which you refinance it.

If you refinance to a better rate, you could save money over the life of your mortgage. However, refinancing at a similar rate and resetting to a 30-year term after owning your home for several years will lower your monthly bill but ultimately increase how much you pay for your overall mortgage.

» MORE: Refinance rates today

Adjust your mortgage

If refinancing doesn’t work for you, other options let you adjust your existing mortgage without taking out a new loan. These strategies work best when you’re facing financial hardship or have extra cash to put toward your principal.

Mortgage recasting

Recasting your mortgage lets you lower your monthly payment by making a large lump-sum payment toward your principal, then having your lender recalculate your payment based on the new, lower balance. Your interest rate and loan term stay the same.

You typically need to pay at least $5,000 to $10,000 toward your principal, plus a recasting fee of $150 to $500. Your lender then re-amortizes your loan, spreading the remaining balance over your existing term at your current rate.

While your monthly payment drops, you won't save as much on interest as you would by refinancing to a lower rate.

Mortgage forbearance

Forbearance temporarily pauses or reduces your mortgage payments during a short-term financial crisis. It’s not a permanent solution since you’ll need to repay the missed amounts later.

With forbearance, your lender agrees to reduce or suspend payments for three to 12 months. After forbearance ends, you’ll either make a lump-sum payment, add the missed payments to your loan balance, extend your loan term or set up a repayment plan.

This option is best for temporary hardships like medical emergencies, natural disasters or short-term job loss. Forbearance doesn’t erase what you owe; it just delays payment. Make sure you understand the repayment terms before agreeing.

Get rid of PMI

Private mortgage insurance (PMI) protects lenders in case a borrower defaults on their mortgage payments. If you put down less than 20% on your home, you’re required to carry PMI, which can add $30 to $70 per month for every $100,000 you borrow.

You can request for your lender to remove PMI as soon as you have 20% equity in your home (your equity is how much you owe subtracted from the original purchase price or the appraised value at the time of purchase). Your lender must automatically drop your PMI once you reach 22% equity, but you can request cancellation once you hit the 20% mark.

If your home’s value has gone up with the market, you will need to refinance to remove the PMI since a new appraisal is required to prove you have enough equity.

Certain loans, such as Federal Housing Administration (FHA) loans, have different rules regarding PMI. For FHA loans, PMI remains for the life of the loan unless you refinance your FHA into a new loan type.

Consider biweekly mortgage payments

While switching to biweekly mortgage payments doesn’t necessarily lower your monthly payment, two payments can be easier to budget for rather than having a lump sum deducted from your account each month.

Biweekly payments also reduce the amount of interest you’ll pay overall, explained Ron Goforth, former senior vice president and director of product development at PNC.

“Essentially, by making biweekly payments, you’re making an extra payment each year, which is applied directly towards the principal of the loan,” said Goforth. “This reduces the amount of interest you’ll pay over the life of the loan, because the principal is being reduced faster. Another benefit is that since you’re reducing the principal more quickly, the mortgage should get paid off quicker.”

Review homeowners insurance and property taxes

Another way to save money is to evaluate how much you are paying for insurance premiums and property taxes.

Ask your current insurance company if there are any steps you can take to reduce your insurance costs, such as adding home security features like a security system or deadbolt locks.

Insurance premiums can vary significantly between insurance providers, so shop around for a new quote. You can also lower your insurance premiums by increasing your deductibles. A higher deductible means you’ll have to pay more out of pocket in the event of a claim, but it can help in your month-to-month budgeting.

Property tax assessments are based on the value of your property and can sometimes be inaccurate or outdated. Review your property tax assessment to ensure it reflects the current market value of your home. If you believe the assessment is too high, you can file an appeal with the local tax assessor's office.

Some areas also offer property tax exemptions or discounts for senior citizens, veterans or those who have energy-efficient features in their homes.

Seek lender support or government assistance

If your mortgage payment is unmanageable, don’t wait to seek help. Here are a few ideas worth checking out to see if you qualify.

Conventional loan modifications

Loan modifications are a long-term relief option for borrowers who are experiencing financial hardship, either through job loss or illness. Lenders are willing to work with eligible borrowers because it is less costly and risky to modify your loan rather than have you face foreclosure.

A loan modification will not reduce the overall amount you owe on your home, but it can lower your monthly bill through a reduction of interest rate or stretching out the loan term.

FHA loan modifications

The Federal Housing Administration offers loan modification programs to eligible homeowners with FHA-insured mortgages. These programs aim to make monthly mortgage payments more affordable by adjusting the terms of the loan. Modifications may involve lowering the interest rate, extending the loan term or even reducing the principal balance in some cases.

Federal assistance programs

The Homeowner Assistance Fund (HAF) began accepting applications in early 2022 from homeowners who faced financial hardship due to COVID-19. The program is meant to prevent things like foreclosure, loss of utilities and home displacement.

Each state runs its own program with limited funding available on a first-come, first-served basis. The program ends in September 2026 or when funds run out, whichever comes first. As of publishing, the program remains open only in Montana, North Dakota, South Dakota, New Jersey, Georgia and the U.S. Virgin Islands.

Local mortgage assistance programs

If you are considered low-income or are on the verge of foreclosure, state and county assistance programs can help modify your loan to make it more affordable. Research which programs are available in your state and whether you’re eligible.

» MORE: Government assistance programs: What are your options?

FAQ

Bottom line

Don’t let your monthly mortgage payment keep you from hitting your savings goals or having some freedom in your budget. It is best to figure out a way to reduce your mortgage payment before you get behind.

Refinancing is one way to lower your payments and possibly remove PMI. If you’re struggling financially, contact your lender to see if you’re eligible for a loan modification or government assistance.