Having a high mortgage payment can put a strain on your monthly budget. While refinancing is often the go-to solution for lowering payments, it comes with costs and isn’t right for everyone. Fortunately, there are alternative ways to reduce your mortgage expenses without refinancing.
Evaluate Options to Lower Mortgage Payments
Here are 6 methods to lower your mortgage payment without refinancing:
- Recast the mortgage
- Remove private mortgage insurance
- Modify the loan terms
- Pay more toward principal
- Lower your interest rate
- Lower your property taxes
Let’s explore each of these in more detail.
Recast the Mortgage
Recasting means making a lump sum payment toward your mortgage principal, after which the lender re-amortizes the loan This lowers the balance, so you pay less interest and have a lower monthly payment
The main requirements are having 20% equity and funds for a large payment. There are typically administrative fees of a few hundred dollars.
Recasting lets you lower payments without refinancing costs. Your interest rate stays the same, however.
Remove Private Mortgage Insurance
If you have private mortgage insurance (PMI), removing it can significantly cut monthly costs PMI is required when a down payment is under 20% of the home’s value
You can request PMI removal once reaching 20% equity. This usually happens automatically around the 22% mark Removing PMI could save over $100 per month
Modify the Loan Terms
If facing financial hardship, you may qualify to modify the loan terms. This involves changing the interest rate, repayment timeline, or loan balance to make payments more affordable.
Modifications are for those unable to pay their mortgage, and can help avoid foreclosure. Make sure you can follow the new terms before applying.
Pay More Toward Principal
Making extra principal payments reduces the interest you pay over the loan’s life. Even small extra amounts can make a difference.
You can have your servicer apply any additional payment to the principal. Or pay half of one extra payment monthly. This builds equity faster, letting you remove PMI sooner.
Lower Your Interest Rate
If your loan allows, replacing your interest rate with a lower one cuts your payment. Options include rate caps on adjustable-rate mortgages or negotiated rate reductions.
Lenders want to avoid foreclosure, so they may approve a lower rate if it keeps you paying. Be sure to get any changes in writing.
Lower Your Property Taxes
Part of your payment goes toward property taxes, so lowering the tax levy reduces your payment. If the assessment seems too high, file an appeal with evidence to support a lower value.
Also look for exemptions, like ones for seniors, veterans, or renovations that increase efficiency. Every dollar of tax savings helps cut your housing costs.
Weigh the Pros and Cons
Recasting, removing PMI, re-amortization, and loan modifications don’t require refinancing fees or credit checks. You also keep your current loan, interest rate, and repayment timeline unless changes are negotiated.
However, recasting requires a large lump-sum payment. Other options mean taking the time to negotiate with your servicer. And any adjustments could incur small administrative fees.
But for those not interested in refinancing or unable to qualify, these alternatives provide ways to meaningfully reduce mortgage expenses. Carefully weigh the costs against the monthly savings to see if pursuing one could work for your situation.
Explore All Avenues
A high mortgage payment stretches your budget. But fortunately, you have alternatives besides refinancing. Look into recasting, removing PMI, re-amortization, modifications, principal pre-payments, negotiated rate reductions, and lowering property taxes. One or more of these options may offer a path to more affordable homeownership.
With creativity and persistence, you may find a way to cut your payment and keep more money in your pocket each month. Don’t assume refinancing is your only option. Work with your lender and explore the possibilities. A little effort could lead to substantial mortgage savings over time.
Consider recasting your loan
Recasting your mortgage involves making a large lump-sum payment toward your balance, after which your lender re-amortizes the loan. With a smaller balance, youll owe less in interest and pay less each month.
Recasting doesnt involve closing costs, although your lender may charge an administrative fee, which is usually a few hundred dollars.
Rules for recasting vary — and not all lenders offer i — but youll at least need to have enough equity in your home and a large enough payment to be approved.
Does paying closing costs lower your mortgage payment?
Avoiding closing costs typically involves rolling those fees into your mortgage, which means youll pay interest on them over the life of your loan. Taking care of the closing cost upfront can save you money. Many lenders also offer closing cost grants to borrowers who meet certain requirements.
How to lower your mortgage payment without refinancing
FAQ
Can I lower my mortgage payment without refinancing?
What is the 2 2 2 rule for mortgages?
For income verification, lenders typically require 2 years of W-2s, 2 years of federal and state tax returns, and your 2 most recent pay stubs. This documentation showcases your financial stability and readiness for homeownership!
How do I pay off a 30 year mortgage in 10 years?
To pay off a 30-year mortgage in 10 years, you’ll need to make extra payments or increase your monthly payments. Making biweekly mortgage payments can also help you repay your loan faster (but probably not that quickly).
Can you negotiate a lower monthly mortgage payment?