Managing a mortgage is a significant aspect of homeownership, and reducing monthly payments while freeing up extra funds can be enticing. Whether you’re a seasoned homeowner looking to ease your financial burden or a first-time buyer wanting to optimize your budget, exploring strategies to lower your monthly mortgage payment can pave the way to a more comfortable and financially secure future.
From exploring refinancing options to making strategic adjustments within your existing mortgage structure, this article will guide you through actionable steps that can potentially put more money back into your hands each month. While the journey to reducing mortgage payments might seem complex, the rewards—such as increased financial flexibility and the potential for greater savings—make it a worthwhile pursuit.
#1 Refinance Your Mortgage
Refinancing your mortgage can be a way to lower your monthly mortgage payment and potentially save money over the life of your loan.
If interest rates are currently lower than the interest rate on your existing mortgage, it is beneficial for homeowners to take advantage of the low rates by refinancing. The lower interest rates can reduce your monthly payment, putting more money in your pocket every month.
However, homeowners should be aware of costs associated with refinancing a mortgage, such as closing costs, title insurance, and application fees. It is crucial to compare the out-of-pocket costs versus the refinancing benefits to determine whether you will save money.
#2 Cut Your Mortgage Insurance Expense
If you put down less than 20% when you bought your home, you are most likely paying for private mortgage insurance (PMI). Most homeowners with a low down payment conventional loan will have to pay PMI until their loan amount is paid down to 20% of the home’s value.
However, if you are tired of seeing PMI payments, there are several ways to get rid of PMI:
- Refinance your mortgage.
- Reappraise your home.
- Request PMI cancellation when your mortgage balance reaches 80%.
- Expand or renovate to increase the value of your home.
- Pay extra on your mortgage to hit 20% equity faster.
#3 Extend the Loan Term
Extending the loan term, the repayment period of your mortgage, from a 15-year to a 30-year term, can significantly lower your monthly payments, putting more money in your pocket each month.
However, extending the loan term will likely lead to paying more interest over the life of the loan.
#4 Apply for Mortgage Forbearance
Mortgage forbearance provides temporary relief by allowing borrowers to make lower monthly payments or no payments at all for a short period. Mortgage forbearance is a great option for homeowners experiencing financial stress, potentially preventing them from paying their monthly mortgage.
Mortgage forbearance does not allow homeowners to waive the missed payments. You will still owe the amount of the missed payments, but your lender will work with you to determine when you will resume payments and how you will make up for those you missed.
#5 Reverse Mortgage
A reverse mortgage allows you to turn your home equity into cash and can be a perfect solution for individuals who are 62 or older. Homeowners typically defer payment of the loan until they die, sell, or move out of the home, but other payment options are available.
The cash from a reverse mortgage can be used to pay off an existing mortgage, eliminating the homeowners monthly mortgage expense, and/or the homeowner can receive cash.
Related: How Does a Reverse Mortgage Work?
We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing, and help clients to lower their monthly mortgage payments.