Effective Ways To Reduce Monthly Mortgage Payments

A high monthly mortgage payment can feel like a burden and you might be looking to reduce this burden. Being over-ambitious during the purchasing home can be one reason for heavy monthly payments. 

Luckily you can work on it even now and reduce your monthly mortgage expenditure.

Following Are The Ways To Reduce Monthly Mortgage Payments

Extend Loan Term

The simplest way to reduce monthly mortgage payments is to extend the repayment term. 

For example: If someone stretches a 15-year mortgage to a 25-year mortgage then by stretching out the term there is more time available to repay it. However, the rate of interest over time increases with this option but it works best for those who need immediate cash flow solutions.

Make A Significant Down Payment

When buying a house, consider making a sizeable down payment in order to keep your monthly mortgage low. Putting at least 20% down is regarded as a good option if you are not in an immediate hurry to purchase try to set aside even more.

Mortgage Refinancing

If someone doesn’t want to extend the mortgage repayment term the option that can be considered in place of it is mortgage refinancing. 

It helps ensure lower interest rates along with smaller monthly payments.


Mortgage Brokers  will look into the following factors before refinancing: 


  • Debt to income ratio
  • Credit history
  • Stability of income
  • Equity in home
  • The market value of the house


In case, it is decided that mortgage refinancing is a suitable option then choose a lender that keeps fees low.

Drop Private Mortgage Insurance (PMI)

If less than 20% of the purchase price is put as a down payment it can be because of regular payment of PMI. It can add tens to hundreds or even thousands of dollars to the overall budget.


One can easily get rid of PMI by paying at least 20% home equity mortgage and then requesting a lender to drop PMI. Once it is approved, the mortgage payment will be lowered.

Redone Property Tax Assessment

If the home loan is “in-escrow” it can take up a noticeable chunk of mortgage monthly payments. Property taxes are based on the worth of a home or land. If the property is undervalued it will cause the taxes to be high.

As a homeowner, one can request a home tax assessment to be done again. If approved, homeowner taxes will be reduced along with monthly mortgage payments.

Interest Only Mortgage

While getting a mortgage some lenders can offer an interest-only mortgage. Consider choosing it to reduce some burden.

It occurs in 2 phases

In The First Phase;

Only interest on the mortgage is paid.

In The Second Phase;

The Actual Principal Balance And Interest Are Paid. While considering the first phase, it is also important to mention that if you have a mortgage of 25 years and in the first 5 years only interest is paid, then the remaining mortgage amount needs to be re-pay in the next 20 years. So this can be a beneficial option if you have future cash flow planning.

Pay PMI Upfront

If a 20% payment in down is not put one can also choose the option to pay PMI upfront. Instead of paying extra on the mortgage year by year, consider fulfilling it once. 

Through this option, monthly mortgage payments will be lowered but be ready for that one-time annual expense.

Rent Out Some Parts Of The Home

If you have some space in your home consider renting out some part of it. If you have an extra bedroom or basement in your home consider renting out to a trusted tenant.

Loan Modifications Programs

If you are undergoing financial hardships and want to reduce mortgage payments consider choosing loan modification programs. There can be certain requirements that one needs to fulfill in order to reduce mortgage payments short-term or long-term.

Streamline Refinance

By considering a streamlined refinance option, the lender is not obligated to re-check your income, employment, or credit sources. It means the loan can be quickly closed and avoid unnecessary paperwork.

Additionally, one can also skip the home appraisal. This means little or no home-equity accrued and lock re-financing at much lower mortgage rate.

Recasting Mortgage

When a mortgage is recast, a large lump sum payment is made to the principal amount while keeping the same maturity date. A recast can help lower the mortgage’s monthly payment without the need for re-financing.

It can be an option for those who recently had a large windfall of cash for instance from an inheritance or from a big bonus.

Close Loan Temporarily With Forbearance

One can close their loan amount via forbearance if they are facing temporary hardships. However, forbearance doesn’t reduce monthly mortgage payments; it just provides temporary relief in the short term. 

Indeed, when the forbearance period ends one has to repay any missed reduced payments to the provider.

That’s why forbearance is not recommended much as it can impact credit scores and can prevent further re-financing.

Benefits Of Reduced Mortgage Monthly Payments

Lower monthly mortgage payment offers a variety of benefits that can be considered.

Lowering monthly mortgage payments can give a little more money each month that can be used for a variety of other urgent or important expenses like retirement funds, home improvement funds, and more.

Lowering monthly mortgages with low-interest rates can save more money in the long run.  However, it needs to be verified with the refinancing cost.

One can also use the amount of money saved to pay off other debts. 

Having extra cash flow is just one potential benefit of it. Depending on the loan product or the financial situation one might be able to switch to longer-term or different types of mortgage rates available.

For example:

From a fixed term rate to an adjustable rate.

If the insurance policy of the property was recently issued one is able to qualify for a reduced re-issue or refinance rate. 

Additionally, depending on your payment history and how much amount one has paid you are able to drop the cost of private mortgage insurance.

Is Refinancing A Worthwhile Option?

Refinancing is a worthy option as it will ultimately save you money over the longer term, and own a house soon by building equity. 

However, it is not a recommended option for those people who are planning to sell their house sooner.