How Can I Lower My House Payment? 9 Effective Ways

Sometimes it’s hard to make your monthly house payment because money is tight. There are ways to lower your mortgage payment and make your budget easier.

Reducing your housing costs provides financial breathing room The extra cash can go toward building savings, paying other debts, or covering rising expenses

While a mortgage refinance is a common way to lower payments, other methods are available too. Depending on your situation, you may qualify for a better loan rate, loan term changes, or ways to cut the costs bundled into your payment.

Let’s explore some of the most effective strategies to shrink your monthly house payment

Refinance to a Lower Interest Rate

Refinancing your home loan is one of the easiest ways to lower your monthly mortgage payment. You might be able to save hundreds of dollars a month by getting a lower interest rate.

Rates fluctuate over time. If you locked in your mortgage rate years ago when it was higher, the lower rates now could save you money. Look at the current rates and see if you can get a better deal by refinancing.

Closing costs are typically 2-5% of the loan amount. Make sure long-term savings exceed the upfront fees. Also, ensure you’ll stay in the home long enough to recoup costs before selling.

A rate-and-term refinance keeps a similar loan term while lowering the interest rate. Or, you could do a cash-out refinance to tap home equity for other financial needs.

Remove Private Mortgage Insurance

If you put down less than 20% at purchase, you likely pay private mortgage insurance (PMI). This added premium protects the lender if you stop paying your mortgage.

PMI isn’t part of your actual mortgage. But it’s bundled into your monthly payment, often adding over $100 per month. As you build equity, you can request PMI removal once you reach 20% equity in the home. This saves you money each month.

An appraisal confirming your equity level is usually needed. Or, if you reach equity through regular payments, PMI can often be taken away automatically without an appraisal.

Extend Your Loan Term

You may also lower your payment by refinancing into a new mortgage with a longer term. This spreads your balance over more years, reducing the monthly payments.

For example, you could refinance your remaining 15 years into a new 30-year term. While you’ll pay more interest over time, the payment reduction can provide immediate relief for your budget.

Before extending your term, run the numbers to see if lower monthly payments outweigh the increase in total interest paid. Make sure it aligns with your financial goals.

Recast Your Mortgage

A mortgage recast lets you make a lump-sum payment on your principal balance. The loan is then re-amortized based on the lower balance. This shrinks your remaining payments.

Say you pay an extra $50,000 on a $300,000 balance. With a recast, your monthly payments would be recalculated based on the new $250,000 balance.

Recasting doesn’t require a refinance or appraisal. Check with your lender for exact policies. There may be a small administrative fee.

Reassess Your Home Insurance

Lenders require homeowners insurance, and the premiums are often bundled into your monthly mortgage payment. If your policy renewal increased your premiums, shop around to compare rates from other insurers.

You can also review your policy to see if any discounts apply, such as bundling with your auto insurance. Increasing your deductible lowers premiums too, but make sure you have savings to cover the larger deductible if needed.

Dispute Property Tax Assessment

For homeowners paying property taxes as part of their mortgage payment, you can potentially lower your payment by disputing a tax assessment.

If you can show your property was over-assessed compared to similar homes that sold recently, the taxing authority may adjust your property value. This lowers your tax bill, reducing the amount bundled into your monthly payment.

Get a copy of your assessment and gather evidence to build your case. An appraisal can help too. Then file an appeal by the required deadline.

Modify Your Mortgage Terms

If facing financial hardship, your lender may approve modifying your mortgage terms to avoid foreclosure. Modifications can include lowering your interest rate, extending your repayment term, or reducing your loan balance.

To qualify, documentation proving your hardship is usually required. You’ll also likely need to complete a trial payment plan successfully before your modification is finalized.

Modifications should only be pursued if you truly can’t afford your current mortgage due to extenuating circumstances beyond your control. They hurt your credit score too.

Request Mortgage Forbearance

Similar to a modification, mortgage forbearance allows you to temporarily pause or reduce payments for a set time. You need to repay the missed payments later.

Hardship documentation is required, and forbearance also damages your credit. It’s meant as a last resort if you can’t make payments due to circumstances like job loss, illness, or disability.

Be cautious before pursuing forbearance, as it can limit your ability to refinance or take other steps until the pause period ends and missed payments are repaid.

Make Extra Principal Payments

One of the simplest ways to reduce your long-term costs is to make extra payments toward your mortgage principal. This builds equity faster while reducing the interest you pay over the loan’s life.

Even an extra $50-100 per month can make a noticeable dent. You can send ad-hoc extra payments or enroll in a bi-weekly payment plan through your lender to accelerate payoff.

While it takes time for the savings to build, extra principal payments guarantee your monthly payment drops once the loan is ultimately paid off.

Key Takeaways

• Refinancing, removing PMI, extending your term, or recasting can help immediately shrink your current monthly mortgage payment.

• Take a close look at taxes, insurance, and other costs rolled into your payment – trimming these saves money too.

• For short-term relief, loan modifications or forbearance temporarily ease the burden, but hurt your credit and finances long-term.

• Paying extra toward your principal is slower to provide relief but guarantees lower payments later by paying off your balance faster.

The bottom line is there are ways to reduce your housing payments if needed. Evaluate the options to find the right approach based on your financial situation and goals. This frees up cash flow for other priorities so you can build financial security.