7 Practical Ways to Lower Mortgage Payments and Reduce Monthly Costs

Yes — another way how to lower mortgage payment is by shopping your homeowners insurance every year. Mortgage lenders usually collect insurance through your escrow account, so a lower premium means a lower monthly payment overall. Gather multiple quotes from reputable insurers and compare coverage before switching.

If you’re struggling to afford your current payment, ask your lender about a loan modification. A modification can adjust your interest rate, extend your loan term or change how your payments are calculated — potentially lowering your mortgage payment permanently. Loan modifications are often granted for financial hardship, so you’ll need to provide documentation showing why you need assistance. This isn’t the most common option for borrowers who are current on payments, but it can be helpful for those needing long-term relief.

One of the most common ways how to lower your mortgage payment is through refinancing. Refinancing replaces your current mortgage with a new one — ideally at a lower interest rate. A lower rate typically means lower monthly mortgage payments over the life of the loan. When interest rates fall, refinancing can be especially effective for those preparing to buy or homeowners looking to reduce long-term costs. Before refinancing, compare multiple lender offers to ensure the fees don’t outweigh your monthly savings.

There are several strategies to lower mortgage payments, including: refinancing at a lower interest rate, recasting your mortgage, eliminating mortgage insurance, modifying your loan, reducing property taxes, finding a lower homeowners insurance rate, and applying for mortgage forbearance in hardship situations. Different options suit different financial goals and timelines — and we’ll unpack each one below.

Your monthly mortgage payment often includes an escrow portion for property taxes. If your local tax assessment is too high, successfully appealing it can reduce your annual property taxes — and lower your monthly escrow payment. Keep in mind this doesn’t change your loan itself, but it reduces your total monthly mortgage expenditure.

Paying extra toward your principal won’t instantly lower your mortgage payment, but it does reduce the total interest you pay over time. In some cases, paying down enough principal can make you eligible for a recast or help you reach the 80% loan-to-value threshold to remove PMI — which can lead to lower monthly payments.

If refinancing isn’t right for you, another way to reduce mortgage payments is through a mortgage recast. Recasting allows you to make a large, one-time principal payment and have your lender recalculate your monthly payments based on the new lower balance. The interest rate and term generally stay the same, and fees are typically much lower than refinancing. This is especially useful if you have extra cash and want a lower mortgage payment without changing your loan.

Mortgage forbearance is a temporary agreement with your lender to reduce or pause payments if you’re facing financial hardship. Forbearance can lower your mortgage payment for a short period — but deferred payments usually have to be repaid later. It’s best used when you need short-term relief due to job loss, medical issues or other unexpected expenses.

The best way to reduce mortgage payments depends on your situation: if rates have dropped, refinancing is often most effective; if you have cash on hand, recasting might beat refinancing; if you pay PMI, removing it can significantly cut costs; if you’re struggling financially, a loan modification or forbearance could help. Each approach has pros and cons, so it’s smart to run the numbers and talk with a trusted mortgage advisor to find the best solution for your budget and timeline.

Private mortgage insurance (PMI) or FHA mortgage insurance can add a significant amount to your monthly bill. Knowing how to lower mortgage payments often means knowing how to eliminate mortgage insurance. If you put down less than 20% at purchase, PMI is usually required. Once your loan-to-value (LTV) reaches 80% or less — either through paying down principal or home price appreciation — you can request PMI removal, reducing your monthly payment.