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Cut Your Monthly Costs: Top Ways to Reduce Mortgage Payments

3 Min Read • 05/13/2024

Owning a home is a significant milestone, but it also comes with substantial financial responsibility, primarily through your monthly mortgage payments. For many, these payments are the largest monthly expense. Reducing this cost can free up funds for savings, investments, or other expenses. Here, we explore several effective strategies to decrease your monthly mortgage payments and enhance your financial flexibility.

1. Refinance Your Mortgage

Refinancing your mortgage is a powerful tool to reduce your monthly payments, especially in a favorable interest rate environment.

How It Works:

When you refinance, you obtain a new mortgage to replace the existing one. This strategy can help you secure a lower interest rate, extend the loan term, or switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.


  • Lower Interest Rates: If interest rates have dropped since you took out your original mortgage or if your credit score has improved, refinancing can significantly reduce your interest rate and, consequently, your monthly payment.

  • Extended Loan Terms: Extending your loan term spreads out the payments over a longer period, which can substantially lower your monthly obligations, though it may increase the total interest paid over the life of the loan.

2. Make Extra Payments

Paying more than the required amount on your mortgage can help reduce the principal faster, which in turn reduces the interest paid over time and can shorten the length of your loan.

How It Works:

You can make an extra payment annually or add a small amount to each monthly payment. Even small additional amounts can lead to significant savings.


  • Reduced Loan Term: Extra payments can significantly decrease the total time it takes to pay off your mortgage, freeing you from payments sooner than expected.

  • Interest Savings: Less principal means less interest, so each extra payment reduces the total cost of your mortgage.

3. Recast Your Mortgage

Mortgage recasting is another less known but effective way to reduce your monthly mortgage payments without refinancing.

How It Works:

With recasting, you make a large lump sum payment towards the principal, and your lender recalculates the monthly payments over the remaining term of the loan based on the reduced principal.


  • Lower Monthly Payments: By reducing the principal, your payments are recalculated to be lower for the remainder of the loan term.

  • No Credit Check Required: Unlike refinancing, recasting generally doesn't require a credit check or an extensive qualification process.

4. Remove Private Mortgage Insurance (PMI)

If you put down less than 20% of your home’s purchase price, you likely have PMI included in your mortgage payments. Removing PMI can reduce your monthly costs significantly.

How It Works:

Once your mortgage balance drops below 80% of the home's original appraised value or purchase price, you can request to have the PMI removed. You might also need a new appraisal to confirm that your home hasn't decreased in value.


  • Cost Savings: PMI can cost between 0.5% and 1% of the entire loan amount annually. Eliminating PMI can reduce your monthly payments and save you thousands over the life of your mortgage.


Reducing your monthly mortgage payments can relieve financial stress and provide more liquidity for other financial priorities. Whether through refinancing, making extra payments, recasting your mortgage, or eliminating PMI, each option offers unique advantages. Consider your financial situation, the current market conditions, and long-term housing plans before deciding on the best approach for you.

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