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9 ways to lower your mortgage payment

If you're in a difficult place financially, lowering your mortgage payment can help you immensely. But this means you'll be paying more interest in the long run. Here's why you might want to lower your mortgage payments, and how to do it.

A high mortgage payment can account for a large amount of your income, leaving you with very little to cover the rest of your regular living expenses.

As a general rule of thumb, we recommend trying to keep your mortgage costs low, preferably under 30% of your take-home income.

If you’re wondering how to lower your mortgage payments each month, there is more than one way to achieve that goal. Here are nine ways to reduce your mortgage.

1. Extend your repayment term

A simple way to lower your mortgage payment is to extend your term (which is also referred to as re-casting or re-amortizing). You don’t need to refinance your mortgage to do this because most lenders will simply offer this service for a fee of about $250.

If you extend your 15-year mortgage to a 30-year mortgage, your monthly mortgage payment will decrease since you have more time to pay back your loan by stretching out the term. While you’ll end up paying more interest on your mortgage over time with this option, it’s best for borrowers who need an immediate solution to cash flow issues.

2. Refinance your mortgage

If you don’t want to extend your mortgage repayment term, you’re not alone. So, another option is to consider refinancing your mortgage which can help ensure a lower interest rate and potentially smaller monthly payment.

If you have good credit, you can refinance your current mortgage and save a bundle.

If you do opt to refinance, make sure you choose a lender that keeps fees low. Our partner, Mortgage Research Center, allows you to get personalized rate quotes for your mortgage refinancing after answering just a few simple questions. It’s a great way to begin your search with no obligation.

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Fiona is another refinance option that can help you find lower your mortgage rates. With Fiona, you provide your remaining loan balance, the current property value, and your current credit score to compare side by side quotes from multiple lenders. The service is free and you’re under no obligation to take one of the offers. That means you can shop rates and see if refinancing might give you a better deal.

If you like one of the rates being offered, you’ll proceed with the lender of your choice to continue with their application and quote process. At that point, the lender of your choosing will likely check your credit and ask for documentation, among other requirements they may have. Since Fiona provides access to its marketplace lenders on your behalf for comparing rates, the turnaround time for your mortgage refinance will vary by each lender.

3. Make a larger down payment

When buying a home, consider putting down a large down payment in order to keep your monthly mortgage low. While it’s best to put at least 20% down, if you aren’t in an immediate hurry to buy, see if you can set aside even more.

The more you put down on your home, the lower your mortgage will be. And if you put at least 20% down, you won’t have to pay private mortgage insurance which will save you quite a bit of money as well.

4. Get rid of your PMI

If you bought your house and put down less than 20% of the purchase price as a down payment, you’re probably paying mortgage insurance on top of your regular mortgage payment. This can add tens or even hundreds of thousands of dollars to the overall cost of your home loan.

The good news, however, is that you can get rid of PMI. First, you have to repay enough of your mortgage so that you gain at least 20% equity in your home.

Then, you can request your lender drop your PMI. Your lender may send an appraiser to your property to verify how much equity you have in your home, but either way, if it is removed, your mortgage payment will be lowered.

At the same time,  if you want to find out if your homeowners insurance is too expensive, we’ve partnered with Policygenius, which helps you compare multiple rates all in one place.

5. Have your home’s tax assessment redone

If your home loan has an escrow, property taxes may take up a noticeable chunk of your mortgage payment each month.

Property taxes are based on each county’s tax assessment of how much your home or land are worth. Some homes in urban areas are overvalued, causing the taxes to be high. The assessment is different from an appraisal since it is conducted by your county for tax purposes only.

As a homeowner, you can request to have the assessment done again by filing with your county and requesting a hearing with the State Board of Equalization. If the protest is approved, your homeowner’s taxes will decrease along with your monthly mortgage payment.

6. Choose an interest-only mortgage

When you get a mortgage, some lenders don’t require you to begin paying off your balance right away and will offer you an interest-only loan. Interest-only (I/O) mortgages occur in two stages: the first phase, where you only pay the interest on your mortgage and the second phase, where you pay off the actual principal balance plus interest.

If you have a 30-year mortgage and spend the first five years paying only interest, your monthly payment may seem pretty low, but you must pay off the rest of your mortgage in the remaining 25 years. I/O mortgages are a temporary way to lower your mortgage payments and can work out as long as you plan to increase your payments after the interest-only phase is up.

7. Pay your PMI upfront

When you close on your home, you’ll have the option to pay your private mortgage insurance upfront if you didn’t put 20% down. Instead of having to pay extra on your mortgage year after year, you can just take care of PMI by paying a one-time fee.

This is why it’s important to budget for extra expenses associated with buying a home and have plenty of savings set aside so you can make money-saving decisions like this. You may not have enough in your bank account to make a 20% down payment, but you may be able to cover your mortgage insurance.

8. Rent out part of your home

If you have the extra space, having a tenant can greatly reduce the cost of your monthly mortgage payment. If you have an extra bedroom, basement, or addition on your home, consider renting space out to a friend or trusted tenant.

Even if it’s just $300/month, that will help knock your mortgage payment down quite bit if you can’t refinance or utilize some of the other options just yet.

9. Federal loan modification programs

If you’re undergoing a financial hardship and need to reduce your mortgage payment as a result, there are a few federal loan modification programs to choose from. They may be available through your lender, but you must meet certain eligibility requirements in order to reduce your mortgage payments short term or long term.


There is more than one way to lower your mortgage payment. In order to determine the best option for you, decide whether you need a temporary or long-term solution. Then, carefully weigh the pros and cons before moving forward.

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