How to Lower Your Mortgage Payment

Written by Banks Editorial Team
4 min. read
Written by Banks Editorial Team
4 min. read

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Probably one of the largest expenses you have is your mortgage payment. Finding ways to lower this expense can free up some cash that you can allocate to other financial obligations. If you want to secure a lower mortgage payment on a house you’re planning to purchase or want lower monthly payments on a home you already own, you may wonder how you can do it.

Good news! There are various ways you can achieve this goal. Keep reading to learn more about the options that can help lower your monthly mortgage payment.

Home Loans and Mortgage Refinancing

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Learn how online mortgage lender loanDepot can help you secure a home loan or refinance your current mortgage to save money in the process.

What Does Your Monthly Mortgage Payment Include?

A mortgage payment is how you pay back your home loan. When you take out a mortgage, your lender will give you a breakdown of what will be included in your monthly mortgage payment. Generally, it comprises four key components: 

  • Principal: This is the original amount of money you borrow to buy a house. The principal is part of your monthly payments and paid off over the life of your loan. Once you buy a home and start making payments, you reduce your loan amount each month. 
  • Interest: When you take out any loan, lenders charge interest in exchange for the amount borrowed. Interest is typically expressed as a percentage of the principal, which is paid down over the loan term. Many factors go into determining interest rates, including your credit history, debt-to-income (DTI) ratio, loan amount and the length of the loan.
  • Taxes: When you buy a house, you must pay property taxes regardless of your location. The property tax bill you’ll pay is dependent on your local tax rates and the value of your property, which can change from year to year. Typically, each state has its own taxation system. 
  • Insurance: The last component of your mortgage payment is insurance. There are two primary types: homeowners insurance and private mortgage insurance (PMI). 

Homeowners insurance is a perfect fit if you want to protect your home against natural disasters or accidents. You can have your lender set aside a portion of your monthly payments in an escrow account for homeowners insurance and pay them on your behalf when due.

Private mortgage insurance isn’t meant for everyone. You’ll only need to pay for it if you don’t make a sizable downpayment. However, lower down payments often present a huge risk to lenders, and for this reason, they might require private mortgage insurance in case a borrower defaults on their loan. 

Options to Help You Lower Your Mortgage Payment

Lowering your mortgage payment can help you save on your monthly bill if your budget is tight. You can achieve this goal before closing on a home or if you already have an existing mortgage. 

Before Closing on a Home Loan

When shopping for a mortgage to buy your dream home, one of the factors to consider is securing a lower mortgage payment. Here’s how you can do it: 

Improve Your Credit Score

One of the most crucial aspects lenders look at when determining your eligibility for a loan, and the interest rate you’ll get on your mortgage is your credit score.  A high credit score can help you secure a lower rate and mortgage payment. 

Before applying for a mortgage, ensure that you have good credit. Here are some of the practical steps you can take to improve your credit score: 

  • Pay bills on time
  • Reduce your credit card balances
  • Keep your credit utilization rate low
  • Request for a credit rescore if you recently paid off your credit card balance
  • Only apply for credit you need

Make A Larger Down Payment

Consider making a larger downpayment to reduce your monthly payments when buying a home — the larger the down payment on your home, the lower the mortgage payment. And if you put at least 20% down, you won’t have to pay private mortgage insurance, which can save you money.

Home Loans and Mortgage Refinancing

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Learn how online mortgage lender loanDepot can help you secure a home loan or refinance your current mortgage to save money in the process.

Reduce Your Mortgage Insurance

Another way of lowering your mortgage when closing on a home is keeping your private mortgage insurance low. You can do this by paying the entire premium at closing or paying the premium upfront and monthly to secure a lower insurance rate on conventional loans.

Choose an Interest-only or an Adjustable Rate Mortgage (ARM)

Many borrowers prefer a 30-year mortgage to an adjustable-rate mortgage, but ARMs can offer a temporary solution to a high mortgage payment. Since the standard ARM period is three, five, and seven years, you can get lower interest rates and monthly mortgage payments.

For Existing Mortgages

If you already have a mortgage and wonder how you can lower your monthly payments, here are some options to consider. 

Extend Your Repayment Term

One simple way to lower your monthly payments is by extending your loan term. This is done by refinancing your mortgage to a new one. For example, if you have a 15-year mortgage, you can refinance to a new 30-year mortgage to lower your payments. Savings depend on individual circumstances. Not all applicants will qualify. (*)

Make Extra Payments

If you get a windfall in the form of a bonus or inheritance, you can allocate the lump sum into your mortgage payments. This will help you reduce your principal and interest, which could lower your monthly mortgage payments.

Get Rid of or Lower Your PMI

If you purchased your home and put down less than 20%, you’ll need to pay private mortgage insurance on top of your standard mortgage payment. However, you can get rid of your PMI by repaying your mortgage until you have 20% equity on your home. After that, request your lender to remove PMI, which lowers your mortgage payments. 

Look For Lower Homeowners Insurance Rates

Homeowner’s insurance often changes from year to year. Shopping around for a better deal can lower your mortgage payments. Before swapping your insurance policy, ensure that you check with your lender about the process of doing it.

Challenge Your Property Tax Assessment

Property taxes affect monthly mortgage payments. You can challenge your property’s value assessment to reduce your tax bill, and lower your mortgage. 

Rent out Your Extra Space

If you have an extra space like a bedroom, basement, or attic, consider renting it out to reduce the cost of your monthly mortgage. Even if it’s just $200 per month, it will help you lower your payments, especially if you’re in financial hardship. 

Refinance Your Mortgage for Permanent Relief

Another option to consider is refinancing your mortgage, especially if the interest rate you’re currently paying is high. Refinancing from a high-interest rate to a lower one could potentially lower your mortgage payments. 

Who Qualifies for a Mortgage Refinance?

Mortgage refinance requirements vary from lender to lender and the type of mortgage you choose. Generally, you may qualify for  refinancing your mortgage if:

  • Your credit score is at least 500
  • Your current mortgage is in good standing
  • You have enough equity in your home
  • Your DTI ratio is low
  • You have enough money to close

Where to Refinance Your Mortgage

If you’re looking to refinance your mortgage to one with more favorable terms, you may want to consider loanDepot. Founded in 2010, loanDepot is a mortgage lender that offers a variety of mortgage financing options, including home refinance and Federal Housing Administration (FHA) loans.

Why Choose loanDepot As Your FHA Lender?

  • Direct FHA mortgage lender
  • Lower interest rates and faster closing
  • Friendly and knowledgeable Licensed Loan Officers

Submit an online inquiry to speak with a licensed loan officer from loanDepot.


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By refinancing the existing loan, the total finance charges may be higher over the life of the loan. ×