How to lower your mortgage payment

If you’re looking for more breathing room in your budget, reducing your mortgage payment is an effective way to do it. Freeing up cash can make it possible for you to invest more for retirement, pay off your debts, or save for a child’s education. There are several ways to reduce your monthly mortgage payment, but it may require you to take a few extra steps or pay an up-front fee.

Key takeaways

• Refinancing your mortgage or switching to a longer loan term can lower your monthly expenses and improve cash flow.
• You don’t have to change your interest rate to save ¾ options like recasting your loan or appealing property taxes can still reduce your payment.
• If you’re facing financial stress, hardship programs or forbearance plans may be available through your lender.

1. Refinance with a lower interest rate

One way to reduce your monthly mortgage payment is to refinance. Refinancing means replacing your current mortgage with a new one with better terms, such as a lower interest rate or a different repayment term. With a refinance, you apply for a new mortgage based on your home’s current value. You use the funds from your new loan to pay off your existing mortgage and start making payments on the new loan.

Because your interest rate determines the cost to borrow money, getting a new loan with a lower rate can reduce your monthly payment and may save you on overall interest.

There are two primary ways refinancing can reduce your monthly mortgage payment.

Look out for lower interest rates

If interest rates have fallen since you took out your current mortgage, refinancing to a lower rate can reduce your monthly payment. It also can save you money in overall interest paid on your loan.

If interest rates have dropped since you took out your mortgage, it’s worth talking to your lender about your refinancing options. They can help you review refinance offers and the steps you need to take to lock in a lower rate and monthly payment.

Buy down your interest rate

You also can buy down your interest rate using discount points, or mortgage points, when refinancing. With a buydown, you pay an up-front fee at closing in exchange for a lower interest rate over the life of the loan. Typically, one discount point costs 1% of your loan amount and reduces your interest rate by 0.25%, though the exact terms vary by lender.

To see if this makes sense, it’s best to calculate your break-even point. This helps you determine the time it takes for your monthly savings to cover the upfront cost.

You can use the following formula:

Break-even point = Cost of points ÷ Monthly savings

Using the example above, a $4,000 cost divided by $65 in savings equals a break-even point of about 62 months, or just over 5 years.

Buying down your interest rate can save you a lot of money if you plan to stay in your home for a while. While it means paying more upfront, you eventually recoup the cost of the points and start saving from then on.

2. Consider mortgage recasting

A mortgage recast resets your repayment term. If you make a large payment on your home loan, your lender may offer to update your monthly payments to reflect the new balance.

Recasting might be a good alternative to refinancing if you want to keep your current mortgage rate and reduce your monthly payment. It’s also typically more straightforward and comes with fewer fees than refinancing.

Here are a few things worth pointing out about recasting:

• Lender’s policy: Not all lenders offer mortgage recasting, and those that do may require a minimum lump-sum payment – usually $5,000 or more.
• Home equity requirements: You’ll typically need a specific amount of equity in your home before you can recast.
• No government-backed loans: This option usually is available only for conventional loans.

3. Remove private mortgage insurance

When you put less than 20% down on a conventional loan, lenders require you to pay for private mortgage insurance. PMI protects the lender if you default on your loan. It’s essentially a tradeoff that gives borrowers with less savings access to home loans. PMI usually adds between 0.1% and 1% of your loan amount to your borrowing costs.

To remove PMI, you need to have at least 20% equity in your home. Once you have enough equity, you can stop paying for PMI. If your home has increased in value, you can refinance to a new conventional loan with enough equity to avoid paying for PMI.

Getting rid of FHA mortgage insurance

If you took out an FHA loan after June 1, 2013, you’re probably paying a monthly mortgage insurance premium. Most FHA loans require borrowers to pay MIP to protect the lender. It encourages lenders to make loans to buyers who can’t afford a 20% down payment. Here’s the official breakdown of when MIP applies.

FHA loans have two types of MIP. There’s an up-front fee equal to 1.75% of your loan value, and an annual MIP fee. Borrowers who make a down payment of less than 10% of the purchase price must pay the annual MIP in monthly installments for the entire loan term. If your down payment is more than 10%, you pay MIP for 11 years only.

One way to eliminate MIP is to refinance your FHA loan into a conventional loan. Just remember, you’ll need at least 20% equity to avoid PMI on the new loan. And qualifying for a conventional loan usually means you must meet stricter lending requirements, like having a higher credit score.

Refinancing with lender-paid mortgage insurance (LPMI)

In some cases, getting rid of PMI through a conventional refinance isn’t an option – especially if you don’t have 20% equity or your credit score needs improvement.

That’s where lender-paid mortgage insurance can help. With LPMI, the lender pays the mortgage insurance cost for you. The cost is built into your interest rate instead of showing up as a separate fee.

LPMI can reduce your monthly mortgage payment, but the tradeoff is paying a slightly higher interest rate – usually about 0.25% to 0.5% more. While you might pay less each month, you could end up spending more over time.

Also, keep in mind that LPMI is paid over the full term of the loan, and you can’t cancel it later like regular PMI. The only way to remove it is by refinancing again in the future. And if your credit score is on the lower side, that higher rate could make this option more expensive overall.

4. Extend the term of your mortgage

Another way to decrease your monthly mortgage payment is to extend your loan term. You can do this through a loan modification, if you’re eligible, or by refinancing into a mortgage with a longer term.

By spreading out your loan balance over more time – say 30 years instead of 15 – you reduce the monthly payment.

5. Shop around for lower homeowners insurance rates

Homeowners insurance reimburses you for losses and damage to your home in case of unexpected events such as a fire or a burglary. Most lenders require homeowners to insure the property as part of the mortgage agreement. Since your insurance premium is typically added to your monthly mortgage payment, finding a lower rate on insurance could reduce your overall housing costs.

Here are a few ways to reduce your homeowners insurance cost:

• Compare quotes. Reach out to several insurance companies and ask for quotes based on your current coverage levels.
• Ask about discounts. Some insurers offer discounts if you have a security system, a newer roof, or if you’re in a low-risk area. You also may qualify for discounts based on your profession or if you buy multiple policies from one company.
• Review your coverage. Make sure you’re not overinsured. You may be paying for coverage you don’t need.
• Increase your deductible. A higher deductible can reduce your monthly premium. Just make sure you can afford to cover the deductible if you need to file a claim.

6. Appeal your property taxes

Property taxes are a way for homeowners to financially support their community by helping pay for things like public schools, parks, roads, and emergency services. Many homeowners pay property taxes through an escrow account with their mortgage lender. If your property taxes go down, your monthly mortgage payment will, too.

The amount you pay in property taxes depends on how much your home is worth – known as its assessed value – and the tax rate in your area. If you think your home is overvalued, you might be able to file an appeal and reduce your tax bill.

Here’s how to get started:

• Look at your property tax statement and check for mistakes, like the wrong square footage or an incorrect number of bedrooms.
• Research recent sales of similar homes in your area to see how your home’s value compares.
• Visit your local tax authority’s website to find the appeal deadline and instructions.
• Collect supporting documents, such as recent appraisals, photos, and comparable sales.
• Submit your abatement request, which you usually can do online, by mail, or in person.
• Wait for a decision to find out if your property taxes will be reduced.

Remember that trying to lower property taxes won’t happen overnight. However, it’s worth trying if you think your home’s value is more than it actually is.

7. Explore loan assistance options

Consider loan assistance programs designed to help homeowners who are struggling to afford their mortgage payments.

Research government assistance programs

If you’re struggling with high mortgage payments, some state and local programs might be able to help. Whether you need short-term relief or longer-term support, these resources are designed to ease financial stress.

Programs vary depending on where you live, but it’s worth checking out what’s available.

Here are a few places to find government mortgage assistance:

• Check your state or local government websites to see if they offer programs for homeowners who need help with mortgage payments.
• Look into nonprofit organizations that connect homeowners with mortgage relief programs.
• Reach out to a HUD housing counselor, who can walk you through your options and help you figure out what might work best for you.

Talk to your lender about mortgage forbearance

Another way to find assistance is by asking your lender about its relief options. Some lenders may temporarily change the terms of your loan so you can catch up on your payments. One option your lender may offer is called mortgage forbearance. This pauses or lowers your mortgage payment for a time.

Although forbearance doesn’t erase what you owe, it does delay your payments until a later time. This can give you some time to sort out your financial situation and get back on your feet. According to research from the Mortgage Bankers Association, about 0.22% of homeowners were in forbearance plans as of early 2025.

The bottom line

Whether it’s through refinancing, recasting, forbearance, or other home loan assistance options, there are ways to reduce your monthly mortgage payment. This can help you make room in your budget for other financial priorities, like paying off debt or putting more money toward investments. What works best for you ultimately depends on your financial situation and the terms of your mortgage.

If refinancing sounds like the right fit, consider starting with an online application. It’s a quick way to see your options and take the first step toward lowering your mortgage payments.