A home is one of the biggest purchases folks ever make—and for many, mortgage takes up a big part of their monthly budget.

If your mortgage payment is becoming too much to manage, there are several ways to lower it.

Before we dive in, let’s break down what makes up your monthly mortgage payments:

• Principal - The portion of your payment that goes toward reducing your loan balance.
• Interest - The cost of borrowing based on your current mortgage rate.
• Taxes - Property taxes calculated from your property’s assessed value and local tax rate.
• Insurance - Required insurance, such as homeowners insurance and private mortgage insurance (which protects the lender if the down payment is below 20%).

Securing a low interest rate is one of the best ways to reduce mortgage costs. It lowers both your monthly payments and the total cost of your loan. To score the best mortgage rates, focus on improving your credit score, comparing mortgage lenders, and choosing the right mortgage for your circumstances.

But what if your rate is already locked in? No worries!

Here are five ways you can lower your monthly mortgage payments.

5 Ways to Lower Monthly Mortgage Payments

Eliminate Private Mortgage Insurance

Homebuyers know the drill. Private mortgage insurance (PMI) means extra cost to your mortgage. No wonder many try to avoid paying for it as much as possible.

PMI primarily protects the lender if you default on your loan. It can cost anywhere from 0.5% to 2% of your loan per year, tacked onto your monthly mortgage bill. So it’s best to put a 20% down payment to skip the extra cost.

But if you’re already paying for PMI, don't worry—you’re not stuck with it forever. As you pay down your mortgage, your lender will automatically remove PMI once your loan balance hits 78% of your home’s original value.

Although there’s no need to wait that long! You can request PMI removal as soon as you reach 20% home equity. Your lender includes this date in your PMI disclosure form at closing. So stay on top of your payments and drop PMI when no longer needed.

Want to speed things up? Extra payments can help you hit that 20% equity mark sooner. You can make bi-weekly payments, additional annual payments, or a lump sum. Just check with your lender to ensure your extra payments go toward your principal.

Extend Your Loan Term

Extending your loan term can lower monthly mortgage payments by spreading your balance over more years. But it also means paying more interest over time.

You can do this by refinancing or loan modification. Let’s explore each option using the following scenario:

With a $250,000 15-year fixed-rate mortgage at a 5.5% interest rate, your monthly payment is $2,043 (excluding taxes and insurance). After five years of paying off debt, your remaining loan balance is about $188,222.

Refinancing to Extend Loan Term

Refinancing replaces your current mortgage with a new loan, often at a new rate and term. In the given scenario, refinancing to a 20-year fixed mortgage with an interest rate of 6.5% will lower your monthly payment to $1,403. But it also means paying more interest over time.

Refinancing mortgage loans also comes with closing costs, so make sure you plan to stay in your home long enough to break even on those expenses.

Loan Modification to Extend Loan Term

Unlike refinancing, a loan modification keeps your existing mortgage and simply adjusts the existing terms. But it’s only granted to borrowers facing financial hardship, and you’ll need to prove it with documents like proof of hardship and income loss.

Let’s say you qualify, and your lender extends your home loan to 20 years at the same interest rate. Your new monthly principal and interest payment for the remaining 15 years will be $1,538.

Loan modifications can negatively impact your credit, so only consider this when you’re in a financial crisis.

Both options reduce your monthly mortgage bill but increase the total cost of your loan due to extended interest payments. If you’re looking for immediate relief, these strategies may help—but it’s important to consider the long-term financial impact.

Refinance to a Lower Interest Rate

If you’re looking to lower your monthly mortgage payments, keep an eye on mortgage rates!

When it drops below your current rate, a rate-and-term refinance allows you to secure the lower rate with the same or a new loan term. That could lead to lower monthly payments and thousands of savings in interest.

Suppose you have a $300,000 30-year fixed mortgage at 6.5%. After five years, rates drop, and you refinance the remaining balance of $280,833 at a 5% rate with the same term. This reduces your monthly principal and interest payment from $1,896 to $1,507.

Even with the term resetting, the total cost of your new loan–including the first five years of payments–is lower than your original home loan.

But refinancing isn’t free—so be sure to crunch the numbers. Closing costs typically range from 2% to 6% of your loan amount. Some lenders may charge a prepayment penalty in fairly rare instances for paying off your mortgage early, usually within the first three years.

For refinancing to pay off, your new interest rate should be low enough to justify these additional costs. Plus, it takes time for savings to offset the costs, so staying in your home long-term is ideal.

On the other hand, if you have an adjustable-rate mortgage (ARM), refinancing to a fixed-rate loan when interest rates drop or even when the fixed rate mortgage interest rate is equal to your introductory rate on your ARM can provide stability on your monthly payments.

Ready to explore refinancing? Conveniently compare lenders and find the best home loan refinance rates at Refinance.com.

Look For Lower Home Insurance Rates

Homeowner’s insurance premiums aren’t technically part of your mortgage, but they’re often paid through an escrow account rolled into your monthly mortgage bill. That means high premiums can drive up your mortgage payments.

If it’s been a while since you bought your home, now’s a great time to shop around. Many insurance providers offer discounts for loyalty, job affiliations, or home upgrades. You may even get lower rates if you bundle your home and auto insurance with the same provider.

A quick review of your insurance policy can help you save money too. Talk with your agent about removing unnecessary coverage or raising your deductible to lower your premium.

Cutting insurance costs can be a quick and easy way to lighten your monthly mortgage expenses. Start by shopping around and comparing quotes from multiple providers.

Appeal Your Property Taxes

When you make your mortgage payment, part of it goes into an escrow account to cover property taxes and insurance.

Since property taxes are based on the local county’s assessment of your home and land value, a higher valuation means higher taxes and higher monthly payments.

If you suspect your home is overvalued, you can file a tax appeal. Compare your home’s value to similar properties in the area to check for discrepancies. If your appeal is approved, your home's value and property taxes will decrease, ultimately lowering your monthly mortgage payments. Speaking to a real estate tax consultant or attorney may give you good input on an optimal course of action.

Key Takeaway

Your monthly mortgage payment includes more than just your principal and interest. It also covers property taxes and insurance that add up to your bill.

Luckily, there are several ways to trim down these costs. Refinancing to a lower interest rate, modifying your loan term, eliminating PMI, or lowering insurance premiums can lighten the load. Each option has pros and cons, so it’s important to weigh them carefully and choose what’s best for your financial situation and goals.

With the right strategy, you can reduce your monthly mortgage payments and make homeownership more manageable.