You may be able to lower mortgage payment costs without refinancing by addressing principal, taxes, insurance, escrow, or private mortgage insurance. Refinancing can lower the payment in some situations, but it also comes with closing costs, paperwork and a new loan.
Homeowners have other ways to reduce what they pay each month without replacing their existing mortgage. Some options require a conversation with the lender, while others involve lowering the non-loan portions of the payment.
Lower mortgage payment costs with a recast
A mortgage recast can reduce your monthly payment without changing your interest rate or loan term.
With a recast, you make a large lump-sum payment toward the principal balance. The lender then recalculates the remaining payments based on the lower balance. Your loan continues under its existing terms, but the required monthly principal-and-interest payment drops.
Recasting often costs much less than refinancing, although not every mortgage allows it. Conventional loans and some other mortgage types may qualify, while government-backed loans can have different rules.
If you’ve recently received a large bonus, inheritance or proceeds from selling another property, a recast may be worth asking about.
2. Challenge Your Property Tax Assessment
Property taxes can make up a substantial portion of a monthly mortgage payment when taxes get collected through an escrow account.
Check your home’s assessed value and compare it with recent assessments or comparable properties in your area. If the assessment appears too high, you may have the right to appeal it through your local tax authority.
A successful appeal could reduce your annual property tax bill. Because escrow payments depend partly on those taxes, a lower bill can eventually reduce the amount you send to your mortgage servicer each month. Learn more about how property taxes affect homeownership costs.
Keep in mind that tax appeals follow local rules and deadlines, so check the requirements before filing.
3. Shop Around for Homeowners Insurance
Your mortgage payment may include homeowners insurance through escrow. That means an increase in your insurance premium can push up your monthly payment even when your mortgage itself hasn’t changed.
Get quotes from several insurers before renewing your policy. Compare the coverage limits and deductibles, rather than choosing based only on the lowest premium.
A lower premium can reduce your escrow requirement. If you switch insurers, make sure the new policy meets your lender’s coverage requirements and that there isn’t a gap between policies.
4. Review Your Escrow Account
Sometimes the higher payment isn’t caused by a permanent increase in your mortgage costs.
Mortgage servicers periodically analyze escrow accounts. If the account experienced a shortage, your monthly payment may temporarily increase to make up the difference.
Check your escrow statement to see how much of the payment goes toward principal, interest, property taxes and insurance. If the shortage has been corrected or your taxes and insurance have fallen, your future payment could decrease after the next escrow analysis.
Don’t assume the payment will automatically drop, though. Review the statement and contact the servicer if the numbers don’t appear correct.
5. Remove Private Mortgage Insurance When Eligible
Homeowners with conventional mortgages may pay private mortgage insurance, or PMI, when they have less than 20% equity in the property.
As the loan balance falls and the home’s value rises, you may become eligible to cancel PMI. Depending on the circumstances, you may need to request cancellation and provide evidence of the home’s current value. This connects directly to the truth about putting 20% down.
Removing PMI won’t change your mortgage interest rate or principal balance, but it can reduce the amount leaving your bank account each month.
6. Put Extra Money Toward Principal
Making additional principal payments won’t immediately lower the required monthly payment on most mortgages. However, it can reduce the amount of interest paid over the life of the loan and help build equity faster.
If your lender allows recasting after a principal payment, you could potentially combine the two strategies. Otherwise, extra payments can still shorten the loan’s payoff period.
Before making a large payment, check whether your mortgage has any restrictions or prepayment penalties. Homeowners should also distinguish recurring payments from the initial home buying fees paid around closing.
7. Ask About a Lower-Cost Payment Schedule
Some lenders may have options that change how payments get structured without requiring a full refinance. For example, certain borrowers may qualify for loan modifications or other payment-relief programs depending on their circumstances.
These options aren’t available to everyone, and they can change the terms of the loan. Ask the lender exactly how the adjustment would affect the interest rate, balance, loan term and total amount paid.
The simplest place to start remains your current mortgage statement. Break down the payment, identify what has increased, and then target that specific expense. If you want to lower mortgage payment costs, reducing insurance, removing PMI, or correcting an escrow issue may help without taking out a new mortgage.
