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Like inflation and the cost of living, mortgages have increased over the years and can seriously dampen your monthly budget. Higher interest rates are one of the primary causes of the increased payments.
Did you know you can free up money by lowering your mortgage payment at the end of the month? We didn’t until we researched the topic further. When we did, we found 12 unconventional ways to lower your monthly payment.
Some of these may be familiar. Others may not. It’s a good reminder to always look for ways to reduce the cost of our homes, especially in the current economic times. Let’s take a look at these twelve tips.
Make a Bigger Down Payment
One of the best ways to lower your monthly mortgage is to put down a larger down payment because the difference between borrowing 95% and 90% can significantly affect your monthly payments.
Of course, this is easier said than done. However, a good rule of thumb is to try to put down a payment of more than 10%. Otherwise, you’ll be stuck with an expensive mortgage, including mortgage insurance, for the rest of your life.
Reduce Your Homeowner’s Insurance Costs
In addition to paying your mortgage monthly, don’t forget about homeowner’s insurance. We’re not saying you should cancel this insurance because it’s super important, but read through your policy and see if you’re paying for things you don’t need.
Shop around to find the insurance provider offering the best terms, or take out all your insurance policies with the same company for a discounted rate.
Recast Your Mortgage
This differs from refinancing your home but can still help lower your mortgage. A mortgage recast means you make a large lump-sum payment toward your mortgage and then ask your lender (the bank, for example) for a better payment schedule.
Your terms and rate will be the same, but your monthly payments will be lower.
Make Bi-weekly Payments
Want to pay off that mortgage hanging over your head? According to CNN, one great hack to do this is by making bi-weekly payments. So, instead of paying one large amount at the end of the month, split that payment into two and pay it every two weeks.
While you’re still paying the same amount for those shorter months, this hack will allow you to make a third-half payment, which will help you pay off the mortgage faster.
Refinance Your Mortgage
The thing about interest rates and mortgages is that these rates can increase and decrease, which you can play to your advantage. If the rates were higher when you bought your house, refinancing them to a lower rate makes sense. However, to ensure it’s worth the hassle of filling out new paperwork with the bank, you should save at least 1% on your total interest rate.
Get a Property Tax Assessment
This is for people who pay monthly property taxes along with a mortgage. In 2023, the U.S. saw the biggest rise in property taxes, with a 6.9 increase. In 2024, these levies rose an additional 3 to 4%.
These increases can eat away at your money. If your property tax bill has risen, you can appeal with your local county property assessor’s office. A tax assessment could see your house valuation lowered, which can reduce your taxes.
Negotiate a Lower Interest Rate
Did you know you can negotiate a lower interest rate with your lender? There are three things that your lender will consider during the negotiation. These are economic factors, your credit score, and the type of loan you have.
High inflation rates can affect how much of a deduction you’ll get, your credit score, and your payment history. If you have a good payment history and a high credit score, your lender will be more inclined to negotiate a lower rate.
Downsize Your Home
One easy way to lower monthly mortgage costs is to downsize your home. If your children have moved out and you have empty rooms, you’re just paying for something you’re not using.
Consider moving to a smaller home or an apartment to save money. Just be sure to shop around before signing your new mortgage.
Apply for a Home Affordable Modification Program
Suppose you’re struggling to pay your mortgage monthly due to financial hardships like losing your job or having excessive and unavoidable medical expenses. In that case, you may qualify for a loan modification program.
Several federal loan programs, like the Making Home Affordable Program® (MHA), can help you avoid home foreclosures.
Lengthen Your Loan Term
Give yourself some breathing room to make payments by refinancing your mortgage to a longer loan term. While this does lower your monthly costs, you should note it will push up your interest and mean you’re stuck paying off the mortgage longer.
However, if you’re not planning on moving house anytime soon, this is a good way to lower your mortgage payment.
Rent Out Spare Space
This one may seem slightly more unconventional than the rest of this list, but it can save you money monthly. If you have rooms you don’t use or even an adjoining property, you may want to consider renting out your space.
This could mean getting a roommate or renting a separate area of your property.
Pay Mortgage Insurance Upfront
If you’re paying off a Conventional Mortgage, you can actually pay off your mortgage insurance at closing instead of paying it off monthly. For example, if you borrowed $150,000 for your home, you would make one lump sum payment of $2,550 instead of $55 monthly.
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