Having a high mortgage payment can put a strain on your monthly budget. While refinancing is often the go-to solution for lowering payments, it comes with costs and isn’t right for everyone. Fortunately, there are alternative ways to reduce your mortgage expenses without refinancing.
Evaluate Options to Lower Mortgage Payments
Here are 6 methods to lower your mortgage payment without refinancing:
- Recast the mortgage
- Remove private mortgage insurance
- Modify the loan terms
- Pay more toward principal
- Lower your interest rate
- Lower your property taxes
Let’s explore each of these in more detail.
Recast the Mortgage
When you recast your loan, you make one big payment toward the principal, and then the lender re-amortizes the loan. This lowers the balance, so you pay less interest and a lower monthly payment.
Finding equity and having enough money for a big payment are the most important things. There are typically administrative fees of a few hundred dollars.
Recasting lets you lower payments without refinancing costs. Your interest rate stays the same, however.
Remove Private Mortgage Insurance
If you have private mortgage insurance (PMI), removing it can significantly cut monthly costs PMI is required when a down payment is under 20% of the home’s value
You can request PMI removal once reaching 20% equity. This usually happens automatically around the 22% mark Removing PMI could save over $100 per month
Modify the Loan Terms
If you are having trouble paying your bills, you may be able to change the terms of the loan. Changing the loan balance, interest rate, or repayment schedule to make payments more affordable is what this means.
Modifications are for those unable to pay their mortgage, and can help avoid foreclosure. Make sure you can follow the new terms before applying.
Pay More Toward Principal
You pay less interest over the life of the loan if you make extra principal payments. Even small extra amounts can make a difference.
You can have your servicer apply any additional payment to the principal. Or pay half of one extra payment monthly. This builds equity faster, letting you remove PMI sooner.
Lower Your Interest Rate
If your loan allows, replacing your interest rate with a lower one cuts your payment. Options include rate caps on adjustable-rate mortgages or negotiated rate reductions.
Lenders want to avoid foreclosure, so they may approve a lower rate if it keeps you paying. Be sure to get any changes in writing.
Lower Your Property Taxes
Part of your payment goes toward property taxes, so lowering the tax levy reduces your payment. If the assessment seems too high, file an appeal with evidence to support a lower value.
Also look for exemptions, like ones for seniors, veterans, or renovations that increase efficiency. Every dollar of tax savings helps cut your housing costs.
Weigh the Pros and Cons
Recasting, removing PMI, re-amortization, and loan modifications don’t require refinancing fees or credit checks. You also keep your current loan, interest rate, and repayment timeline unless changes are negotiated.
However, recasting requires a large lump-sum payment. Other options mean taking the time to negotiate with your servicer. And any adjustments could incur small administrative fees.
But for those not interested in refinancing or unable to qualify, these alternatives provide ways to meaningfully reduce mortgage expenses. Carefully weigh the costs against the monthly savings to see if pursuing one could work for your situation.
Explore All Avenues
A high mortgage payment stretches your budget. But fortunately, you have alternatives besides refinancing. Look into recasting, removing PMI, re-amortization, modifications, principal pre-payments, negotiated rate reductions, and lowering property taxes. One or more of these options may offer a path to more affordable homeownership.
With creativity and persistence, you may find a way to cut your payment and keep more money in your pocket each month. Don’t assume refinancing is your only option. Work with your lender and explore the possibilities. A little effort could lead to substantial mortgage savings over time.
Consider recasting your loan
When you recast your mortgage, you make a big payment toward the balance all at once. The lender then re-amortizes the loan over time. With a smaller balance, youll owe less in interest and pay less each month.
Recasting doesnt involve closing costs, although your lender may charge an administrative fee, which is usually a few hundred dollars.
There are different rules for recasting, and not all lenders offer it. To be approved, you must have enough equity in your home and a large enough payment.
Does paying closing costs lower your mortgage payment?
Usually, the only way to avoid paying closing costs is to add them to your mortgage. This means you’ll have to pay interest on them for the life of your loan. Taking care of the closing cost upfront can save you money. Many lenders also offer closing cost grants to borrowers who meet certain requirements.
How to lower your mortgage payment without refinancing
FAQ
Can I lower my mortgage payment without refinancing?
Yes, it is possible to lower your mortgage payment without refinancing. A loan modification is a common way to do this. You talk to your lender about changing the terms of your loan, which could mean lowering your interest rate or extending the length of your loan.
What is the 2 2 2 rule for mortgages?
Lenders usually need your two most recent pay stubs, two years of W-2s, and two years of federal and state tax returns to prove your income. This documentation showcases your financial stability and readiness for homeownership!.
How do I pay off a 30 year mortgage in 10 years?
To pay off a 30-year mortgage in 10 years, you’ll have to make extra payments or pay more each month. Making biweekly mortgage payments can also help you repay your loan faster (but probably not that quickly).
Can you negotiate a lower monthly mortgage payment?