Feeling the squeeze of your monthly mortgage payment? You’re not alone. Many homeowners are looking for ways to reduce their housing costs without the hassle of refinancing. The good news is, several strategies can help you achieve this goal.
In this guide we’ll explore various methods to lower your mortgage payment without refinancing including:
- Recasting your mortgage
- Canceling your mortgage insurance
- Lowering your homeowners insurance or property taxes
- Considering a bi-weekly mortgage payment plan
- Asking your lender for a loan modification
- Paying off your loan faster
Let’s dive into each option and see how it can benefit you
Recasting Your Mortgage
By making a one-time lump sum payment towards the principal balance of your mortgage, you can effectively “restart” your loan with a lower balance and possibly a lower monthly payment. If you have some extra money to spare and would like to see an instant reduction in your monthly payments, this is the best option.
Here’s an example:
- Current loan balance: $200,000
- Interest rate: 5%
- Remaining loan term: 20 years
- Monthly payment: $1,200
After making a lump-sum payment of $50,000:
- New loan balance: $150,000
- Interest rate: 5%
- Remaining loan term: 20 years
- New monthly payment: $900
As you can see, recasting your mortgage can significantly reduce your monthly payment. However, it’s important to note that you may incur fees for this process, so be sure to factor those into your decision.
Canceling Your Mortgage Insurance
If you put down less than 20% for your down payment, you’re likely paying private mortgage insurance (PMI). This can add hundreds of dollars to your monthly payment. The good news is, you may be able to cancel your PMI once your home equity reaches 20%.
Here’s how:
- Contact your lender and request a home appraisal.
- If the appraisal shows your home value has increased, your equity may have reached the 20% threshold.
- Your lender will then cancel your PMI, resulting in a lower monthly payment.
Keep in mind that some lenders may require you to pay for the appraisal yourself.
Lowering Your Homeowners Insurance or Property Taxes
Your monthly mortgage payment often includes escrow for homeowners insurance and property taxes. Reviewing these guidelines and looking into ways to cut them may help you save money on rent overall.
Here are some ways to lower your homeowners insurance:
- Shop around for quotes from different insurance companies.
- Increase your deductible.
- Remove unnecessary coverage.
- Install security features in your home.
To lower your property taxes, you can:
- Appeal your property assessment if you believe it’s inaccurate.
- Look for exemptions or deductions you may qualify for.
Over time, even modest savings on these expenses can add up to substantial savings.
Consider a Bi-Weekly Mortgage Payment Plan
Instead of making monthly payments, consider switching to a bi-weekly payment plan. This means making half payments every two weeks instead of one full payment each month. While it may seem like a small change, it can lead to substantial savings over the life of your loan.
Here’s why:
- Making 26 half-payments per year is equivalent to making 13 full payments.
- This essentially reduces your loan term and saves you interest in the long run.
Talk to your lender about switching to a bi-weekly payment plan and see if it’s right for you.
Ask Your Lender for a Loan Modification
If you’re facing financial hardship and struggling to make your mortgage payments, reach out to your lender and inquire about a loan modification. This could involve lowering your interest rate, extending your loan term, or reducing your monthly payment.
Remember, lenders are often willing to work with borrowers to avoid foreclosure. Be prepared to provide documentation of your financial hardship and work with your lender to find a solution that works for both of you.
Pay Off Your Loan Faster
One of the most effective ways to lower your mortgage payment is to pay off your loan faster. This can be achieved through various strategies, such as:
- Making extra payments towards your principal.
- Rounding up your monthly payments.
- Refinancing to a shorter loan term.
By paying off your loan faster, you’ll not only reduce your monthly payments but also save a significant amount of interest over the life of your loan.
Lowering your mortgage payment without refinancing is possible with various strategies. By exploring the options outlined above, you can find ways to reduce your housing costs and free up more of your monthly budget for other expenses.
Remember, it’s essential to carefully evaluate your financial situation and choose the strategies that best fit your needs and goals. Don’t hesitate to reach out to your lender or a financial advisor for guidance and support.
Recast your mortgage
Applying a sizable lump sum payment to your loan principal while maintaining the same maturity (payoff) date is known as a mortgage recast. You may be able to maintain your current low mortgage rate by using a recast to reduce your mortgage payment without refinancing.
“This is a very low-cost and efficient option because it changes the re-amortization schedule of your loan and, consequently, reduces principal and interest due each month without having to refinance,” says Derks.
If you have recently received a sizable windfall of money, such as from an inheritance or a sizable bonus at work, you may want to consider recasting your mortgage. Speak with your servicer, the company you pay your mortgage payments to, if you’re considering recasting your home loan. They’ll be able to walk you through your options.
Temporarily pause your loan with forbearance
Forbearance is another option if you’ve had a brief period of hardship and income loss. It allows you to temporarily stop making loan payments. Remember that while forbearance can offer temporary relief, it won’t ultimately result in a decrease in your monthly mortgage payments.
“While a forbearance will allow you to postpone payments on your mortgage, it does not allow you to skip the payments altogether,” says Cindy Laffey, branch partner and mortgage planner at Inlanta Mortgage in Pewaukee, WI.
In fact, upon the expiration of the forbearance period, you will be required to make up for any underpaid balances or, in the event that your financial situation permits, collaborate with your provider to determine the best repayment plan. Derks warns, “Forbearance is not usually advised because it can prevent you from refinancing and negatively impact your credit scores.”
Mortgage Hack: Unlock Savings Without Refinancing
FAQ
Can I lower my mortgage payment without refinancing?
How can I get my mortgage payment lowered?
Can I negotiate a lower mortgage rate without refinancing?
Is it possible to reduce mortgage payments?
Can a refinance lower my mortgage payment?
A mortgage refinance is often the most direct way to reduce your payment amount, but it’s not your only option. Here are nine ways you can lower your monthly mortgage payment — with or without a refinance. 1. Refinance with a lower interest rate The primary reason homeowners refinance is to lower their mortgage interest rate.
How do I lower my house payment without refinancing?
Here are some alternative ways to lower your house payment without refinancing: A mortgage recast lowers your monthly mortgage payments. You pay a lump sum of cash to your lender, which is applied to your outstanding principal balance. Your lender then recalculates your monthly payments based on the reduced balance amount.
Should you refinance your mortgage?
“Refinancing might offer you a better deal if you can lower your interest rate,” Steiner suggests. “A mortgage refinance can lower your monthly payment at the cost of extending your loan and possibly repaying more money overall.” But usually refinancing involves more expensive fees, scrutiny of your credit, and paperwork.
How can I lower my mortgage payment?
“Canceling mortgage insurance premiums is perhaps the most likely way to lower your total monthly payment in the current market,” said loan officer Jon Meyer. “Although rates are up, so are values,” he adds. Check your PMI removal eligibility with a lender. Start here 3. Extend your loan term