How to Lower Your Mortgage Payment: 7 Proven Strategies
Your mortgage is likely your biggest monthly expense. Even a small reduction in your payment can free up hundreds of dollars every month. In this guide, we'll show you 7 proven strategies to lower your mortgage payment, from refinancing to making extra principal payments. We'll also help you calculate exactly how much you can save.
Average Savings
$100-300/mo
Through refinancing alone
Total Savings
$50,000+
Over the life of your loan
Time to Results
30-45 days
For most refinancing
7 Strategies to Lower Your Mortgage Payment
1. Refinance Your Mortgage
Replace your current mortgage with a new one at a lower interest rate
✓ Benefits
- Can save $100-300+ per month
- Works best in a falling rate environment
- Can shorten loan term while lowering payment
⚠ Considerations
- Closing costs: $2,000-5,000
- Break-even point: 2-3 years
- Requires good credit
Use our Refinance Mortgage Calculator: Calculate your exact savings with this strategy.
Open Calculator →2. Make Extra Principal Payments
Pay more than your minimum monthly payment to reduce principal faster
✓ Benefits
- Reduces total interest paid
- Shortens loan term
- No refinancing costs
- Flexible (pay extra when you can)
⚠ Considerations
- Requires extra cash flow
- Doesn't lower monthly payment
- Check for prepayment penalties
Use our Mortgage Payoff Calculator: Calculate your exact savings with this strategy.
Open Calculator →3. Switch to a Shorter Loan Term
Refinance from 30-year to 15-year mortgage (or similar)
✓ Benefits
- Significantly lower interest rate
- Build equity faster
- Pay off mortgage sooner
⚠ Considerations
- Monthly payment will be higher initially
- Requires higher income/credit
- Less flexibility
Use our Mortgage Calculator: Calculate your exact savings with this strategy.
Open Calculator →4. Improve Your Credit Score
A higher credit score can qualify you for better interest rates
✓ Benefits
- Better refinance rates
- Can save $50-150+ per month
- Improves other loan terms too
⚠ Considerations
- Takes 6-12 months to improve significantly
- Requires disciplined credit behavior
- May not help current mortgage
Use our Refinance Mortgage Calculator: Calculate your exact savings with this strategy.
Open Calculator →5. Negotiate with Your Lender
Ask your current lender to modify your loan terms
✓ Benefits
- No refinancing costs
- Faster process
- Lender may be willing to negotiate
⚠ Considerations
- Limited success rate
- May not get significant reduction
- Requires good payment history
Use our Mortgage Calculator: Calculate your exact savings with this strategy.
Open Calculator →6. Remove PMI (Private Mortgage Insurance)
If you have PMI, paying down to 20% equity removes this cost
✓ Benefits
- Can save $100-300+ per month
- Automatic removal at 22% equity
- Significant savings over time
⚠ Considerations
- Requires 20% equity
- Takes time to build equity
- Lender must approve removal
Use our Mortgage Calculator with PMI: Calculate your exact savings with this strategy.
Open Calculator →7. Extend Your Loan Term (Carefully)
Refinance from 15-year to 30-year to lower monthly payment
✓ Benefits
- Significantly lower monthly payment
- More monthly cash flow
- Easier to qualify for
⚠ Considerations
- Much higher total interest paid
- Takes longer to pay off home
- Only use if necessary
Use our Mortgage Calculator: Calculate your exact savings with this strategy.
Open Calculator →Quick Comparison: Which Strategy is Right for You?
| Strategy | Payment Reduction | Timeframe | Costs | Effort |
|---|---|---|---|---|
| Refinance (1% lower rate) | $100-200/mo | 30-45 days | $2,000-5,000 | Medium |
| Extra Principal Payments | None (but saves interest) | Immediate | $0 | Low |
| Shorten Loan Term | Increases initially | 30-45 days | $2,000-5,000 | Medium |
| Improve Credit Score | $50-150/mo | 6-12 months | $0 | High |
| Remove PMI | $100-300/mo | Varies | $0 | Low |
Real Example: How Much Can You Save?
Scenario: Sarah's Mortgage
Loan Amount
$300,000
Current Rate
6.5%
Loan Term
30 years
Current Payment
$1,896/mo
What if Sarah refinances at 5.5%?
Note: This example assumes refinancing costs of $3,000. Sarah's break-even point is about 15.5 months, so refinancing makes sense if she plans to stay in the home 2+ years.
Step-by-Step: How to Refinance Your Mortgage
Step 1: Check Your Credit Score
Get your free credit report at annualcreditreport.com. A score of 740+ gets the best rates.
Step 2: Calculate Your Break-Even Point
Use our Refinance Calculator to see if refinancing makes financial sense. Aim for a break-even point of 2 years or less.
Step 3: Shop Around for Rates
Get quotes from 3-5 lenders. Compare interest rates, closing costs, and loan terms. Don't just pick the lowest rate.
Step 4: Review the Loan Estimate
Lenders must provide a Loan Estimate within 3 days. Review all fees and compare across lenders.
Step 5: Lock Your Rate
Once you find a good rate, lock it in. Rate locks typically last 30-60 days.
Step 6: Complete the Application
Provide documentation (pay stubs, tax returns, bank statements). The lender will order an appraisal.
Step 7: Final Review & Closing
Review the Closing Disclosure 3 days before closing. Sign documents and fund the loan. Your new payment begins next month.
Frequently Asked Questions
Ready to Lower Your Mortgage Payment?
Use our free calculators to see exactly how much you can save with each strategy.
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About the Author
Jeremy Dunn is the creator of BudgetCalcPro, a budget management tool that helps people manage their budgets and finances.