Try these methods to lower your monthly mortgage payment. Many homeowners would welcome a lower mortgage payment. Even though refinancing is the most widely used strategy for reducing your monthly mortgage payment, it's not always the best choice. The good news is that a few other tactics, such as mortgage recasting, eliminating private mortgage insurance (PMI), and finding ways to lower your property taxes and insurance, can assist you in paying off that recurring bill without having to refinance into a new loan. You can select the most appropriate course of action for your situation by learning more about how to reduce a mortgage payment without refinancing.
Main Points
- Refinancing a mortgage is not always the best option for homeowners looking to lower their monthly mortgage payments.
- You can pay less each month overall if you can cut any of the line items that are part of your payment.
- Your monthly payments can be decreased with mortgage recasting, but you'll need a lump sum of money.
- Removing PMI.
- Contesting your property tax assessment.
- Shopping around for lower home insurance premiums.
When You May Want To Avoid Refinancing
Even though refinancing is one of the most common ways to drastically lower your mortgage payment, it's not always the best choice. Refinancing might not be a smart move, for instance, if: You doubt your ability to fulfill the requirements. Borrowers who want to refinance must go through a rigorous loan application process and adhere to strict income and credit requirements. Your interest rate is already suitable. Refinancing is probably not the best option if you can't lower your rate by enough to cover the closing costs while still enjoying a lower payment. In the near future, you intend to relocate. Make sure you'll stay in the house at least long enough to recoup the closing costs because they can be substantial. Important: Don't be afraid to contact your lender to go over your options if you're having trouble making your mortgage payments. Many lenders offer temporary relief through their hardship programs. You might even be eligible for a loan modification that lowers your monthly payment.Methods For Decreased Mortgage Payments Without Refinancing
If refinancing is not a choice for you, there are other ways you can lower your monthly mortgage payments. Since PITI (principal, interest, taxes, and insurance) makes up the majority of mortgage bills, lowering any one of those components can lower your payments.Refinance Your Loan
If you have a lump sum of money that you can use to pay off your mortgage, mortgage recasting might be an option for you. You'll consent to making a sizable upfront payment if your lender permits it (plus a recasting fee, which is usually a few hundred dollars). The remainder of your payment schedule will be recalculated by the lender, usually for the same term. Your monthly bill ought to decrease as a result of the decreased principal. On the plus side, the clock won't start over on a new 30-year mortgage, and you won't need to worry about meeting loan qualifications as you would with a refinance. Verify, though, that paying the lump sum won't cause you to spend all of your cash reserves or emergency fund. Having a discussion with your financial advisor about whether a mortgage recast is the best course of action for you may be worthwhile if you're thinking about doing so. "If you've received a sizable inheritance or have been saving for a while, weigh the costs and benefits of the mortgage recasting against other investment options," advised Auerswald. But he added that a recast might be the best option if you've been having trouble making your monthly mortgage payments. You cannot refinance your mortgage if it is backed by the government, such as an FHA, VA, or USDA loan. Only traditional loans are recastable.Get Rid of Your PMI
If you put down less than 20% at the start on your home, private mortgage insurance (PMI) is a part of your mortgage payment. When your principal balance reaches 78 percent of the original value of your home, as specified in your contract, your servicer must automatically terminate PMI. If your principal balance has increased to 80% of the original cost of your home, you can also ask your lender to stop paying PMI. If your home's value rises, though, you might cross that 80 percent mark sooner than you anticipate—as long as you can document it with an appraisal. Dan Green, CEO of Homebuyer.com, stated via email: "If you're paying mortgage insurance and have lived in your home since 2019, you're probably eligible to have your PMI removed." Green claimed that because home values have risen so significantly in recent years, most homeowners will have built up sufficient equity to do away with the PMI requirement. To learn more about the procedure for requesting the cancellation of PMI, speak with your lender. If you are successful, you will reduce your mortgage payment by the amount you are presently making each month.Compare prices on homeowner's insurance
It's a good idea to search for lower-priced homeowners insurance periodically. Call around and request quotes from a few different insurers if switching makes sense. Please make sure that the home insurance coverage you are comparing quotes for is comparable and adequate. You might be able to reduce your bill even if you want to stick with your current home insurance provider. For instance, Green noted that the majority of insurance companies give discounts for bundling two or more policies. For instance, think about getting your car insurance from the same provider as your home insurance. You might also think about increasing your deductible. For instance, increasing your deductible from $500 to $1,000 could lower your premium.Reconsider your property taxes
Your home's assessed value determines how much your property taxes change each year; if they do, your mortgage payment will also rise. However, you will pay a higher property tax bill than you would if your house is incorrectly assessed. According to Bill Samuel, a full-time residential real estate developer, homeowners can appeal their property taxes through their regional assessor's office. He specializes in renovating, renting, and selling homes in the Chicago area. You might be able to get your real estate taxes reduced, according to Samuel. "The rules and specifics of real estate taxes will vary by location." Check for any discrepancies by first going over all the data the assessor has on file for your property. You might have a strong case for challenging your property taxes if you discover any incorrect information that might indicate the estimated value provided by the assessor is exaggerated (for instance, despite having only three, your home is listed as having five bedrooms. Samuel also advised speaking with a local tax appeal expert to help you assess the valuation and determine whether there is a chance to lower it.The Bottom Line
Your budget may be able to expand if you can lower your mortgage payment without refinancing. You can lower your monthly payment without having to go through the hassle of a full refinance by lowering any of the elements that go into it, such as the principal, mortgage insurance, property tax, and home insurance.Most Commonly Asked Questions (FAQs)
What percentage of the mortgage payment is reduced by a down payment?
Your loan terms and monthly payment amount are directly impacted by the down payment you make. To begin with, you will be required to pay private mortgage insurance if you cannot put down 20% or more (PMI). In the end, your payments will be lower the more you put down because it will reduce the size of your principal loan. A mortgage calculator shows that, for instance, a $60,000 down payment on a $300,000 home at a 4% interest rate would result in a principal and interest payment of $1145.80 per month. The monthly payment will be $1050.31 if you put down $80,000 instead. Keeping some cash reserves on hand for repairs, upgrades, and emergencies is preferable to use all of your available funds for a down payment.Can I adjust the deadline for my mortgage payment?
As soon as your home purchase is finalized, your mortgage payment due date will be determined. You can always ask your lender for more information about the specific details of their policy on changing the due date. It's important to remember that most loans have a grace period, which gives you a couple extra days to make your payment before you face penalties for being late. The option of biweekly payments may be available for some loans.How come my mortgage payment increased?
Your payment amount will increase if your property taxes or home insurance premiums rise because many mortgages mandate that taxes and insurance costs be added to your mortgage payment. Even if your loan has a fixed rate, your property taxes and insurance costs are not set in stone. As a result, you can anticipate paying a little bit differently each year.