How to Lower Your Monthly Mortgage Payment

When your mortgage is your biggest monthly expense, even a small payment reduction can offer much-needed breathing room. If you’re dealing with rising living costs, preparing for future expenses, or just trying to build more financial stability, understanding how to lower your mortgage payment can make a meaningful difference. 

Fortunately, you have options. From refinancing to reassessing taxes and insurance, practical steps could reduce your monthly payments. Some of these options may even save you hundreds of dollars a year. 

Let’s break down some of the most effective ways to lower your mortgage, including whether you should refinance your loan or explore other adjustments that could benefit your budget. 

Key takeaways 

• Lowering your mortgage payment can improve monthly cash flow, creating more opportunities to save or pay other expenses. 
• Refinancing your loan with a lower interest rate or a longer term is a popular option for reducing monthly mortgage bills.  
• You may be able to remove private mortgage insurance (PMI) if you have enough equity or reduce your homeowners’ insurance if your coverage needs have changed. 
• Appealing your property tax assessment or requesting a mortgage recast could lead to lower monthly costs without refinancing.  

1. Refinance for a lower rate 

Perhaps the most effective way to lower your monthly mortgage payment while saving cash over time is to refinance your home loan at a lower interest rate. 

When you refinance, you replace your current mortgage with a new one — ideally with better terms. So, if you improved your credit and now qualify for a lower interest rate than your original loan, refinancing could reduce the amount you owe every month. 

For example, if you have a $300,000 loan with 7.1% interest, your principal and interest payment is about $2,015. Lowering your rate just a single point to 6.1% could reduce this payment to around $1,812 — saving you more than $200 each month. 

To qualify for a refinance at a lower rate, lenders will look at your credit score, debt-to-income ratio (indicating how much debt you can take on), and how much equity you currently have in your home. If you’re considering this strategy, it helps to understand how refinancing works and what closing costs may apply. Refinancing involves additional fees, and your savings depend on how long you plan to stay in your home.  

2. Refinance to extend your loan term 

Another way to reduce your monthly mortgage payment is by refinancing to a loan with a longer term. While this may not lower your interest rate, stretching your repayment over a greater number of years — say, from 15 to 30 years — can lower your monthly payment so it’s more manageable. 

Spreading out your total loan balance over more years reduces individual payment amounts. This can be especially helpful if you’re dealing with short-term financial pressures and need more immediate budget relief. But there’s a trade-off. 

Extending your loan term means you’ll pay more in total interest over the life of the mortgage. While you’ll pay more to borrow, this strategy may be a worthwhile option if your focus is on improving cash flow now. 

Use AmeriSave’s AI tools to get a personalized quote and see what your payments might look like with different loan terms. 

3. Remove your private mortgage insurance (PMI)

If you bought your home with less than 20% down, there’s a good chance you’re paying private mortgage insurance (PMI) — an added cost that protects the lender should you happen to default. Once you’ve built at least 20% equity in your home, you may be eligible to remove these PMI payments. 

Removing PMI is one of the fastest ways to lower your monthly mortgage payment as it can cost anywhere from 0.3% to 1.5% of your loan amount each year. On a $300,000 loan, that could mean shaving off $75 to $375 per month on your payments.  

To see if you’ve reached that 20% equity threshold:  

• Check your most recent mortgage statement and compare your current loan balance to your home’s appraised value.  
• Subtract your loan balance from your home’s appraised value. This is your equity. 
• Divide your equity by your home’s appraised value and multiply by 100 to determine your equity percentage. 

If you’re at 20%, contact your lender and request PMI removal. The process may require a formal appraisal to verify your home’s value, but this one-time cost could pay for itself within a couple of months. 

4. Lower your homeowners insurance

The cost of homeowners insurance is typically rolled into your monthly mortgage payment so overpaying on coverage isn’t always obvious. And it can quietly inflate your housing costs. 

According to Forbes, the average cost of home insurance for a $350,000 home is $1,951 per year in 2025 — roughly $163 per month. These costs can vary, however, depending on factors like your home’s location, value, and coverage limits. 

To potentially lower your rate, start by reviewing your current policy. Look for coverage you may not need or discounts you might be missing out on, such as bundling options, installing a security system, or upgrading your roof. Then, shop around and compare quotes from other insurers. Even a modest reduction in your annual premium can lead to noticeable monthly savings. 

5. Evaluate your property taxes

Because property taxes are often paid through your mortgage escrow account, they directly impact your monthly mortgage payment total. These taxes are set by your local government based on your home’s assessed value, not necessarily its market value. That means if your home’s overvalued, you could be paying more than you should. 

If you feel you’re paying too much, you as a homeowner have a right to appeal your property tax assessment. Doing so successfully could reduce your annual tax bill and, by extension, your monthly mortgage payment. 

Start by reviewing your assessment letter and comparing your home’s assessed value to similar properties in your area. If the numbers seem off, reach out to your county assessor’s office and ask about their appeals process, including required documentation. 

Even a small adjustment in your property taxes could lower your monthly mortgage payment.  

6. Consider a mortgage recast

A mortgage recast is a lesser-known strategy to get your mortgage payment lower without refinancing. It involves making a large lump-sum payment toward your loan principal, after which your lender recalculates your monthly payments (under the same interest rate and loan term) based on the new, lower balance. 

Typically, recasting is only an available option for those with conventional loans, and not all lenders offer it. If your lender offers it and you’ve come into extra cash — say, a bonus or an inheritance — a recast might be a smart way to reduce your monthly mortgage payment with minimal fees. 

7. Talk to your lender if you’re struggling to make payments

If you’re finding it hard to keep up with your mortgage payments, the worst thing you can do is stay silent and miss payments. One of the most important steps is reaching out to your lender early to discuss how to lower your mortgage payment. 

Lenders often have programs designed to help homeowners in financial distress. This may include loan modifications that can reduce your monthly payment by extending a loan’s term, adjusting the interest rate, or (in rare cases) even reducing the principal. 

Being proactive shows good faith and opens the door to potential solutions — before missed payments lead to penalties or the risk of foreclosure. 

Frequently asked questions 

How do I lower my mortgage payment without refinancing? 

You may be able to lower your monthly mortgage payment by removing private mortgage insurance (PMI) once you’ve built enough equity, reducing your homeowners’ insurance premium, or appealing your property tax assessment. Some lenders also offer mortgage recasting, which can lower your payment without changing your interest rate or loan term.