Why lowering your mortgage payment matters
Your home loan is the largest monthly bill you’ve got. When that payment drops you can breathe a bit easier — whether that means building up a cushion for emergencies, paying down higher-interest debt or simply feeling a bit more financially secure each month.
A typical monthly mortgage payment includes a chunk for the principal (what reduces the actual loan amount), interest (what your lender charges you for borrowing), property taxes, homeowners insurance and sometimes mortgage insurance. The strategies covered here target one or more of these components — but remember, not every option will be right for every homeowner, so treat this as a starting point for research rather than personal financial advice.
Get your finances in order before looking to lower your mortgage payment
Before you start looking at ways to cut your mortgage payment, grab your latest mortgage statement and work out what exactly is going to principal, interest, escrow for taxes, escrow for insurance and any mortgage insurance or PMI line items.
Log in to your mortgage servicer’s online portal to make sure you’ve got an escrow account and review the latest escrow analysis letters. Different strategies can target different parts of your monthly mortgage payment:
- Refinancing changes the way your principal and interest payment add up
- Shopping around for insurance or appealing property taxes impacts your escrow
- Ditching mortgage insurance eliminates that line item entirely
Have your own numbers at the ready so you can compare any new offer to your current mortgage payment.
Calculate your break-even point before refinancing
The break-even point is how many months it takes for your new savings to cover the upfront fees and other closing costs.
Simple math: If refinancing costs you $4,800, and you save $160 per month on your mortgage payment, your break-even point is 30 months. Refinancing generally makes sense if you expect to keep the home — or the loan — beyond that period.
A CrossCountry Mortgage loan officer can help crunch the numbers and project monthly savings across several scenarios, so you can compare options side by side.
Use a mortgage recast instead of refinancing
Mortgage recasting is another way to get a lower monthly mortgage payment without refinancing. You make a lump sum payment toward your principal balance, and the lender recalculates your payment using the new balance and remaining term — without changing your interest rate.
Here’s how it works:
- Most lenders will want you to be current on your loan
- This is more commonly an option for conventional loan products
- Administrative fees will likely be around $250 to $500
- It doesn’t automatically shorten your term
Example: Putting $20,000 toward your balance could make a big dent in your required monthly mortgage payment — while also saving you total interest over the life of the loan. Not every lender or loan type allows for recasting. Dial up your current loan servicer to make sure you’re eligible.
Remove or reduce mortgage insurance (PMI and MIP)
Don’t forget, mortgage insurance is there to protect the lender, not you, if you happen to default on your payments. There are a lot of homeowners who end up paying private mortgage insurance on conventional loans after making less than a 20% down payment, or FHA mortgage insurance premiums (MIP) on FHA loan products.
Conventional loans: You can ask to cancel PMI once your loan to value is at 80% based on the original price you paid for the place. Federal rules automatically cancel PMI at 78% if you’re up to date on your payments. Good news — if the value of your home is rising, you might end up with enough equity sooner, but some servicers will still want you to get an appraisal, and that can cost you.
FHA loans: MIP usually sticks with you for the life of the loan if you put down less than 10%. Lots of homeowners remove MIP by refinancing into a conventional loan once they’ve got about 20% equity and meet the conventional credit and income requirements.
CrossCountry Mortgage does both FHA and conventional refinance options, so a loan officer can run the numbers on whether keeping MIP or refinancing into a PMI-free loan will save you more.
Adjust your property taxes when possible
Property taxes get factored into your escrow account. If local tax assessments rise, your monthly mortgage payment goes up. So it’s worth checking in with your county or city to see if you can lower your tax bill.
Here’s a step-by-step guide to potentially lower your tax bill, and thus your monthly mortgage payment:
- Check your county or city assessment each year
- Compare the assessed value to recent comparable home sales
- If the assessed value seems way off, find out when you can appeal (if you’re lucky, there’s still time)
- Gather some proof — such as recent sale prices of similar homes
- Put together a case to submit to the local assessor’s office
Some states have homestead exemptions, senior or Veteran exemptions and disability-related reductions that might help you out. Do yourself a favor and check on your state or county tax website to see if you qualify.
Property tax changes may take a billing cycle or more to show up in escrow. So while this is a good long-term strategy, you might not see the benefits right away.
Shop for a lower homeowners insurance premium
Your insurance premium usually gets paid through escrow, so lowering it can directly cut into your monthly mortgage payment after the next escrow analysis.
So how can you potentially reduce your premium and lower your monthly mortgage payment?
- Compare quotes from multiple insurers every year or two
- Up your deductible (just be sure you can afford the higher out-of-pocket cost)
- Add or update smoke detectors and security systems
- Bundle home and auto policies
- Improve your credit score (if that’s an option)
Just make sure your new quote offers similar coverage limits and deductibles. Don’t just cut corners to save money, talk to a licensed insurance agent before making any changes.
Use extra payments strategically
Extra payments won’t lower your required monthly mortgage payment right away, but they will shorten your loan term and save you on interest. This can open the door to future options like recasting or refinancing at a lower loan amount.
Here are a few simple strategies to try:
- Add a fixed amount to your principal each month
- Make one extra full payment per year
- Try splitting your monthly payment into biweekly half-payments (just be sure your servicer is applying them correctly)
Always make a point to designate extra amounts as “principal only” so you know they’re reducing your principal balance rather than prepaying future interest. Grab an extra payment calculator to see how paying extra could affect your payoff date and total amount paid.
Consider loan modification or forbearance in hardship situations
If you’re struggling to make payments after losing a job, dealing with a medical emergency, or another hardship, two options might help you lower your mortgage payment temporarily or permanently.
Loan modification is a permanent change to your existing mortgage terms — say, reducing the interest rate, extending the term or adding missed payments to the end of the loan. Modifications are usually reserved for borrowers who are behind on payments or are at serious risk of default. Approval standards are pretty strict, and they vary by servicer.
Mortgage forbearance is a temporary pause or reduction in payments. Missed amounts usually get tacked on to the end of the loan — either all at once, through higher payments or added to the end of the loan.
Forbearance can help you avoid immediate foreclosure and negative credit reporting, but understand the repayment terms before you agree. Get in touch with your loan servicer as early as possible if you’re facing hardship, and keep a record of any arrangements in writing.
How CrossCountry Mortgage can help you explore options
There isn’t just one “best” way to lower your mortgage payment — the right approach depends on your rate, balance, home equity, credit, income stability and how long you plan to stay in the property.
As a nationwide lender with a broad range of products, CrossCountry Mortgage can compare multiple refinance structures — conventional, FHA, VA, USDA and specialized programs — to see which one works best for your financial situation.
A loan officer who is licensed can take a closer look at your current statement, figure out when it makes sense for you to break even on a new mortgage and run different scenarios like dropping PMI, changing the terms or making smart use of the equity in your home.
When you’re ready to take the next step, you can have a chat with a CrossCountry Mortgage loan officer or use an online calculator to run your own numbers and work on your own terms.
Frequently asked questions about bringing down your mortgage payment
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To be honest, in most cases, the first payment on a new loan is due 30-60 days after closing, so if you’ve got a lower rate, you can expect to see the benefits kick in with that very first new payment. Of course, closing dates, servicing transfers and where you live can all affect exactly when that starts. By the way, any prepaid interest at closing will cover the gap until the new loan balance payment schedule kicks in.
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The answer is sometimes. Some mortgage lenders will let you do a “no closing cost” refinance, where a slightly higher interest rate will cover upfront fees. Just keep in mind that in the long run, you might end up paying more interest all told. There are other non-refinance options like recasting, removing PMI or adjusting insurance and taxes that could also lower your mortgage payment with pretty minimal or no upfront costs.
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Extending your term through a refinance or modification by itself doesn’t hurt your credit score. What your credit score is really based on is payment history and how much you owe in total. There might be a tiny little dip when a new credit account is opened because of a hard inquiry and changes to the average age of accounts, but if you keep making on-time payments, then credit-wise, it really doesn’t matter.
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Well that depends on you — what are your goals, how much cash-flow do you need, what other debts you’ve got, your retirement savings and how much risk you’re willing to take on all play a part. Some homeowners like flexibility — a lower required mortgage payment that lets them make extra payments whenever they can. You might want to speak with a financial pro to get a clear picture of how your mortgage stacks up in the big picture.
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A cash-out refinance lets you tap home equity, but you could still lower your mortgage payment if the new rate is lower or the term is longer. But be aware that taking cash out eats into your equity and may increase lifetime interest costs — so be up front about what you plan to do with the cash. A CrossCountry Mortgage loan officer can model out both cash-out and non-cash-out scenarios side by side so you can see which one works out best for you in terms of payment, equity and total interest over time.
