5 Ways To Lower Your Mortgage Payments
Get lower mortgage payments by refinancing, extending the loan term, saving on home insurance, appealing property taxes, and getting rid of mortgage insurance.
Written by Payton Ternus
Reviewed by Melanie Reiff
Table of Contents
- Lowering monthly mortgage payments
- Refinancing your mortgage
- Getting rid of your mortgage insurance
- Extending your mortgage term
- Submit an appeal on your property taxes
- Look for lower rates on homeowners insurance
- Benefits of having lower mortgage payments
- How to save on car and home insurance
- FAQs
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Monthly mortgage payments can be lowered through refinancing, getting rid of mortgage insurance, extending the loan term, appealing property taxes, and finding lower rates on homeowners insurance.
If you’re looking to add some extra cushion to your monthly budget, one way to free up some cash is by lowering your monthly mortgage payment. There are multiple options to help you lower your mortgage payments, from refinancing to extending your loan term.
The experts at
Jerry
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for home insurance
has done the research for you to help lower your mortgage payments. We'll outline the best ways to save on your mortgage payments—and bundle your insurance plans to save on home and car insurance rates as well! Lowering monthly mortgage payments
Mortgage payments typically take up a significant portion of monthly budgets. When you buy a house, you may not have the same cash flow you did before. If you’re looking to free up some extra money and reduce your monthly expenses, you can look into lowering your mortgage payments.
There are five options to lower your monthly mortgage payments: refinancing, getting rid of mortgage insurance, extending your mortgage term, submitting an appeal on your property taxes, and looking for lower home insurance rates. Keep reading to learn more about each option and see which may be right for you.
MORE: 15 questions to ask a mortgage broker
Refinancing your mortgage
The first way to save money and get a lower monthly payment is by refinancing your monthly interest rate. You’ll want to keep a close eye on the housing market to see if interest rates are lower than what you currently have—if the market is hot, you may not be able to get a lower rate. Once the mortgage rates drop, get in touch with your mortgage lender to secure your new interest rate.
If you can’t find any lower interest rates right now, you could lower your rate by buying the rate down with mortgage discount points. You would generally buy these points upfront as prepaid interest while finalizing your closing costs, and each point equals one percent of your loan amount. One mortgage discount point typically reduces an interest rate by 0.25% to 0.5%.
It’s important to remember that refinancing your mortgage is not the same as a mortgage recast, which is a lump sum you pay towards your remaining mortgage. But both options can help you reduce your mortgage payments.
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Who can qualify for mortgage refinancing?
To qualify for a refinanced mortgage, your lender will want to make sure you meet certain requirements. These are similar to the requirements you needed to meet when you first applied, and they often include:
- Credit score
- Current value of the home
- Debt-to-income ratio (DTI)
- Home equity
- Income stability
You will also need to pay around 2-6% of your loan amount in refinancing closing costs, so double-check your bank account to see if this is feasible for you.
Getting rid of your mortgage insurance
Mortgage insurance can add a pretty penny to your expenses, so getting rid of it can help expand your monthly budget. However, you have to make sure your lender approves of this change.
FHA mortgage insurance
If you have a loan from the Federal Housing Administration (FHA), you are required to pay a monthly mortgage insurance premium (MIP) for the first 11 years of your mortgage if you put more than 10% down. You will have to pay the MIP for the entire duration of your mortgage if you put down less than 10%.
In this case, refinancing into a conventional—or private—home loan may be the best option to get rid of MIP—but it will depend on your home’s equity. If you own at least 20% of your home in equity, you won’t need to pay for mortgage insurance. But if you have less than 20% equity in your home, you will be swapping your MIP for private mortgage insurance.
Private mortgage insurance
If you put less than 20% down when you bought your home, you likely will pay for private mortgage insurance (PMI). Once you reach 20% in equity, you can request your lender to remove PMI from your monthly payment or it is automatically canceled when you reach 22%.
If 20% is out of reach, you can refinance to lender-paid mortgage insurance (LPMI). With this option, you can choose to pay a higher interest rate or pay for the insurance in a lump sum upfront.
Extending your mortgage term
If your main goal is lower monthly payments to free up your monthly budget, extending the mortgage term will spread out your total loan amount over more payments. A longer-term length generally means you'll have lower monthly payments.
However, you may end up paying more in total interest over the loan term. This could really add up, so it's smart to do some planning before extending your mortgage.
MORE: Everything you need to know about interest-only mortgages
Submit an appeal on your property taxes
Your property taxes are probably part of your monthly mortgage payment if you have an escrow account on your mortgage. Your county’s tax assessment will determine your property taxes based on how highly the assessor values your home.
If the county assessor values your home too high, you could end up paying more in property taxes than you should. You can protest the assessment if you believe your home is overvalued—an updated assessment could help you get a lower monthly payment!
Let Jerry find you the best homeowners insurance policy for your needs
* checking your rate won’t affect your credit score
Shop Now
* checking your rate won’t affect your credit score
Look for lower rates on homeowners insurance
If homeowners insurance is included in your monthly mortgage payment, you may not be getting the best rate. Shopping around is an easy way to find new savings. Try shopping around with at least three different places to find homeowners quotes. Then compare the rates and coverage included. Be sure to ask about any discounts and
bundling
offers. All of this comparison takes time, so using a broker app (like Jerry!) will make it easy!
Jerry
can help you save on your homeowners (and car!) insurance policies by comparing rates from name-brand insurance providers in under a minute.Benefits of having lower mortgage payments
The main benefit of having a lower mortgage payment is the additional cash flow you’ll get every month. With a larger monthly budget, you can put those extra savings towards things like:
- Building savings for unexpected home repairs or other costly expenses
- Building savings for retirement and/or education
- Managing any cost increases for homeowners insurance and property taxes
- Paying off credit cards or other loans
If you need or want some extra cash each month, lowering your mortgage payment can be a big help in achieving your goal!
How to save on car and home insurance
A home is the biggest purchase most people make in their lifetimes—you need a solid
homeowners insurance
policy to protect your investment. But how can you possibly get all the coverage you want at a good price point?Enter
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FAQs
How can I lower my mortgage payment without refinancing?
If you do not qualify for refinancing or want an alternative, it’s possible to lower your mortgage payment by extending the term length of your loan, submitting an appeal on your property taxes, shopping for lower home insurance rates, or getting rid of your mortgage insurance.
Will my mortgage payment go down after 5 years?
Your mortgage payment can go down after 5 years if the interest rate falls. It will depend on your individual mortgage and local housing market.
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