How to Lower Your Mortgage Payment Without Refinancing?

Owning a home is a big deal but the monthly mortgage payment can feel like a weight on your shoulders. If you’re having trouble keeping up with your mortgage you’re not alone. Many homeowners are looking for ways to lower their monthly payments without going through the hassle and expense of refinancing. Whether you’re facing financial challenges or just want a more manageable payment there are options.

Understanding Your Mortgage Payment

Your mortgage payment is more than just the cost of the loan; it’s made up of several components. Knowing what those are will help you figure out where you can cut costs.

Here’s a breakdown of the key parts:

Principal

This is the original loan amount you borrowed to buy your home. Each month you pay it down slightly depending on your loan term and interest rate.

Interest

This is the cost you pay to the lender for borrowing money, calculated as a percentage of the principal. A larger portion of your early payments typically goes toward interest rather than the principal.

Property Taxes

Property taxes are assessed by your local government based on your home’s value. They are usually included in your monthly mortgage payment and held in escrow to pay them on time.

Homeowners Insurance

Lenders require insurance to protect your home. The annual premium is split into monthly payments and held in escrow.

Private Mortgage Insurance (PMI)

If you put less than 20% down payment your lender may require PMI. This extra cost protects the lender in case of default but adds to your monthly payment.

What Is Refinancing?

Refinancing means replacing your current mortgage with a new one, usually to get a lower interest rate, lower monthly payment or change the loan term.

Why Refinancing May Not Be Ideal?

Refinancing can lower your mortgage payment but it’s not always the best for everyone.

Here’s why:

Upfront Costs: Refinancing has closing costs, appraisal fees and other charges that can range from 2% to 6% of the loan amount which may be more than the savings.

Extended Loan Term: Refinancing to a longer term mortgage may lower your monthly payment but increase the total interest paid over the life of the loan.

Credit Score Requirements: Lenders require good credit to qualify for the best rates which may not be available to all homeowners.

Current Interest Rates: If rates have gone up since your original mortgage, refinancing may put you into a higher payment instead of a lower one.

Length of Stay in the Home: If you plan to move soon you may not benefit from refinancing as it takes years to recoup the upfront costs.

How to Lower Your Mortgage Payment Without Refinancing?

01. Recast your Mortgage

Mortgage recasting is a lesser known but effective way to lower your monthly payments without refinancing. This means making a large lump sum payment towards your mortgage principal and asking the lender to re-amortize the loan.

How Recasting Works?

When you recast your mortgage the lender applies the lump sum payment to your loan’s principal balance. Then the remaining balance is re-amortized over the original loan term and you get lower monthly payments.

Example:

Let’s say you have a $250,000 mortgage with 20 years remaining, and your current monthly payment is $1,400. If you make a $20,000 lump-sum payment and recast the loan, your lender recalculates your payments based on the new balance of $230,000. This can lower your monthly payment to $1,200 or less, depending on your interest rate.

Key Details About Recasting

Low Fees: Unlike refinancing, recasting doesn’t involve closing costs. However, most lenders charge an administrative fee ranging between $250 and $500.

Not for Government-Backed Loans: Recasting is unavailable for FHA, VA, or USDA loans. It’s typically offered for conventional loans.

No Change to Terms: The loan’s interest rate and repayment period remain the same, so you benefit from reduced payments without altering the loan structure.

02. Eliminate your Mortgage Insurance

Private mortgage insurance (PMI) or mortgage insurance premiums (MIP) can significantly increase your monthly mortgage payment. Eliminating these charges could save you hundreds of dollars a year.

Here’s how to navigate the process based on the type of mortgage insurance you have.

Private Mortgage Insurance (PMI)

PMI is a type of insurance required for conventional loan borrowers who put down less than 20% when purchasing a home. It protects the lender, not you, in case of default.

How to Remove PMI?

Reach 20% Equity

Once your loan balance reaches 80% of your home’s original purchase price, you can request the removal of PMI.

Lenders are required to automatically remove PMI when your loan balance hits 78% of the home’s value.

Leverage Increased Home Value

If your home’s value has risen significantly, you might already have 20% equity.

Contact your lender and provide evidence, such as a recent appraisal, to support your case for PMI removal.

Mortgage Insurance Premium (MIP)

MIP is required for FHA loans and functions similarly to PMI, but the rules for removal differ.

Key Points About MIP:

Borrowers with FHA loans who put down less than 10% must pay MIP for the life of the loan.

For those who put down 10% or more, MIP lasts 11 years.

How to Get Rid of MIP?

Refinance Into a Conventional Loan

If your credit score and equity qualify, refinancing into a conventional loan can help eliminate MIP entirely.

Pay Off the Loan

While not practical for most, paying off the loan is the only other way to eliminate MIP without refinancing.

03. Shop for Cheaper Homeowners Insurance

Homeowners insurance is a vital part of protecting your property and liability, but rising premiums are becoming a significant burden for many homeowners. According to the National Association of Realtors, the average premium is expected to increase by 6% this year, following a 20% hike over the past two years. While maintaining coverage is essential, overpaying isn’t—and lowering your insurance costs can help reduce your overall mortgage payment.

Ways to Lower Your Homeowners Insurance

Bundle Policies

Many insurers offer discounts—typically between 5% and 15%—when you combine multiple policies, such as auto and homeowners insurance, with the same provider.

Compare Quotes

Shopping around for quotes from different insurers is one of the easiest ways to find a better rate. Even small savings can add up over time.

Maintain a Good Credit Score

Insurers often consider your credit score when determining premiums. A higher score can result in lower insurance costs.

Look for Loyalty Discounts

If you’ve been with the same insurer for several years, check to see if you’re eligible for loyalty discounts. Many companies reward long-term customers with reduced premiums.

Retiree and Senior Discounts

If you’re a retiree or over a certain age, some insurers offer special discounts for senior homeowners.

04. Review and Adjust Property Taxes

If you have an escrow account in your mortgage, part of your monthly payment goes towards property taxes. Lowering those taxes will lower your overall mortgage payment.

Understand How Property Taxes Work

Property taxes are determined based on your county’s assessment of your home’s market value. An overestimated assessment can lead to unnecessarily high taxes, increasing your monthly mortgage payment.

Steps to Review Your Property Taxes

• Check Your Tax Bill

Look for your property’s assessed value on your tax bill or the county’s website. Compare it to the actual market value of your home.

• Spot an Inflated Assessment

If your property’s assessed value is too high, investigate. A higher value means higher taxes so it’s important to get it right.

• Gather Evidence

Get documents like recent sales in your neighborhood or an independent appraisal report to support your case for a lower value.

• Challenge the Assessment

File an appeal with your local tax authority. Submit your evidence and follow their process.

Benefits of Challenging Property Taxes

A successful appeal can get you a lower property tax bill. Since these are part of your monthly mortgage payment, that means lower payment and long term savings.

05. Request a Loan Modification

A loan modification is an option for homeowners who can’t pay their mortgage. It’s an agreement with your lender to permanently change your mortgage terms and give you relief by lowering your monthly payment.

What is a Loan Modification?

A loan modification means changing one or more of your mortgage terms:

• Reducing the interest rate to make payments more manageable.
• Extending the term to lower monthly payments.
• Changing the loan type, for example, from an adjustable rate mortgage (ARM) to a fixed rate loan.

Qualifying for a Loan Modification

To qualify, you’ll need to show financial hardship which can be:

• Job loss or significant reduction in income.
• High medical bills due to illness.
• Costs from a natural disaster or other unexpected events.

Your lender will require proof, such as income documentation, medical bills or property damage.

Benefits and Trade-Offs

Benefits:

• Lower payments give you immediate relief.
• Prevents foreclosure and lets you stay in your home.

Trade-Offs:

• Extending the loan term means you’ll pay more interest over the life of the loan.
• The process will ding your credit score, but less than foreclosure.

06. Take Advantage of Forbearance Programs

Forbearance is a temporary fix to help you manage financial hardship. It allows you to skip or lower your payments and give you time to get back on your feet.

How Forbearance Works?

Forbearance doesn’t erase your mortgage obligations but defers them for a limited period. During this time, you won’t have to make your full monthly payments or, in some cases, any payments at all. However, the missed payments are not forgiven and will need to be repaid later, often through a repayment plan or loan modification.

Other Ways to Lower Your Mortgage Payment Without Refinancing

If the above options don’t work for you, here are more ways to lower your mortgage payment without refinancing:

Extend Your Loan Term

Extending your loan term won’t change your interest rate or loan amount but spreads the payments out over a longer period and lowers your monthly payment. Just keep in mind this may increase the total interest paid over the life of the loan.

Set Up a Biweekly Payment Plan

Switch to a biweekly payment plan and divide your monthly payment in half and make payments every 2 weeks. This doesn’t lower your monthly payment but helps you save on interest over time and build equity faster and may qualify you for PMI removal sooner.

Seek Assistance Through Hardship Programs

If you’re struggling financially, check if your lender has hardship programs. These programs can offer temporary payment reductions or pauses like forbearance but may have customized solutions like deferred payments or interest rate reductions.

Rent Out Part of Your Home

If you have extra space in your home rent out a room (e.g. a basement or spare room) to generate income to help with your mortgage payments. Check local regulations and your lender if required.

Utilize Energy Tax Credits

If you’ve made energy efficient upgrades to your home (e.g. solar panels or energy efficient windows) you may be eligible for federal or state tax credits. These savings can help reduce your financial burden so you can put more towards your mortgage.

Negotiate with Your Lender

Some lenders may be willing to rework your loan terms especially if you’ve been a good borrower. Not common but it may get you a lower interest rate or modified payment schedule.

Frequently Asked Questions

Can You Remove Someone From a Mortgage Without Refinancing?

You can take someone off a mortgage without refinancing by asking your lender for a “release of liability”. This can happen in cases like a divorce or when one borrower sells their share of the property.

But many lenders are not willing to release a co-borrower from the mortgage as having more people liable for the debt reduces their risk. If they do agree, the remaining borrower will need to prove they can afford the full mortgage payment on their own.

Can I Change Mortgage Companies Without Refinancing?

No, you can’t switch mortgage companies without refinancing. Your current mortgage must be paid off and a new loan with the new company will be created. This requires refinancing which means applying for a new mortgage possibly with different terms or rates.

Will My Mortgage Company Lower My Interest Rate Without Refinancing?

In most cases no. Mortgage companies don’t lower your interest rate unless you refinance. But if you’re experiencing financial hardship your lender may offer relief through loan modifications which could include lower interest rates.

How to Remove Someone From a Mortgage Without Refinancing?

As we mentioned above, to take someone off a mortgage without refinancing you can ask your lender for a “release of liability” as long as the remaining borrower can afford the mortgage payments. The process requires lender approval and proof of financial stability.