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So I was talking to a borrower last week who'd been carrying a 7.2% mortgage from spring 2023, and she almost started crying when I showed her what refinancing could save her. Not gonna lie, those moments are exactly why I got into this industry at 18, helping folks breathe a little easier with their monthly budgets.
If you're looking for more breathing room in your budget, reducing your mortgage payment is one of the most effective ways to do it. Freeing up cash makes it possible to invest more for retirement, pay off credit cards, or finally start that college fund you've been putting off. There are multiple ways to reduce your monthly mortgage payment, though some require upfront costs or paperwork. But the long-term savings usually make it worthwhile.
Between you and me, now is actually a pretty solid time to explore these options. Mortgage rates have dropped from their January highs above 7% to the low 6% range as of December 2025, giving homeowners real opportunities they haven't had in months.
Refinancing is one of the best ways to lower your monthly mortgage payment. When you refinance, you get a new loan with better terms, such as a lower interest rate or a different repayment period. This replaces your current mortgage. You get a new mortgage based on how much your home is worth right now. You use that money to pay off your old loan and then start over with the new one.
Your interest rate is what you pay to borrow money, so getting a lower rate can cut both your monthly payment and the total interest you'll pay over the life of the loan by a lot.
According to Zillow and other market sources, the average 30-year fixed mortgage rate is 6.12% and the average 15-year rate is 5.50% as of November 2025. This is a big improvement over January 2025, when rates were above 7%. If you got your mortgage in 2023 or 2024 when rates were often over 7%, refinancing now could save you thousands of dollars each year.
If you have a $300,000 mortgage at 7.2% from 2023, your monthly payment for the principal and interest is about $2,038. If you refinanced to the current rate of 6.12%, your payment would go down to about $1,815, which would save you $223 a month or $2,676 a year.
If interest rates have gone down since you got your current mortgage, refinancing to a lower rate will lower your monthly payment and save you money on the total interest you pay over the life of the loan. The Federal Reserve cut rates in September, October, and December 2025, which means the rate environment improved throughout the year.
The 10-year Treasury yield, inflation data, and employment numbers are just a few of the things that affect mortgage rates. Inflation is still around 3%, but the Fed wants it to be around 2%. This means there is room for improvement. If you locked in your mortgage when rates were higher, you should talk to a lender about your options for refinancing.
When you refinance, you can also lower your interest rate with discount points, also known as mortgage points. A buydown means you pay a fee up front at closing in exchange for a lower interest rate for the life of the loan. One discount point usually costs 1% of your loan amount and lowers your interest rate by about 0.25%. However, the exact terms depend on the lender.
To see if this plan makes sense, figure out your break-even point, which is the time it takes for your monthly savings to pay for the initial cost.
To find the break-even point, divide the cost of points by the monthly savings.
Let's look at a real-life example. Let's say you want to refinance a $400,000 mortgage. You can lower your rate from 6.12% to 5.87% by paying $4,000 for one point (1% of the loan amount). Your monthly payment goes down from $2,420 to $2,355, which saves you $65 a month.
$4,000 ÷ $65 = 62 months, which is just over 5 years.
If you plan to stay in your home longer than the break-even point, it makes sense to buy down your rate. You will eventually make up the money you spent up front and start saving money from then on. And here's where it gets interesting: if you're going to stay in one place for more than 10 years (like my wife and I are, since we have a newborn and her cousin living with us), those savings really add up over time.
When you make a big payment toward your principal, a mortgage recast changes your payment schedule. Your lender will use the new, lower balance to figure out your monthly payments again, but they will keep your current interest rate and loan term the same.
If you want to keep your current mortgage rate but lower your monthly payment, recasting might be a good option. It's usually easier than refinancing and costs a lot less—usually only $200 to $500, compared to 2% to 5% of the loan amount for refinancing.
Suppose you have a mortgage balance of $350,000 and 25 years left to pay it off at 5.5%. You pay $2,144 a month in principal and interest. Your new balance goes down to $300,000 if you get a $50,000 inheritance or bonus and put it toward your principal. Your lender may be able to recalculate your payment based on this lower balance, which will lower it to about $1,838. You're saving $306 a month without changing your good 5.5% rate.
Here are some important things to know about recasting:
Policy of the lender: Not all lenders will let you recast your mortgage. Most of the time, those who do require a minimum lump-sum payment, which is usually $5,000 or more. However, many prefer minimums of $10,000 to $20,000. Industry data shows that recasting fees usually fall between $150 and $500, which is a lot less than the costs of closing on a refinance.
Home equity requirements: To be eligible for a recast, you usually need to have a certain amount of equity, which is usually 20% or more.
Limitations on the type of loan: This option usually only works for conventional loans. Most of the time, FHA, VA, and USDA mortgages don't let you recast.
I remember one borrower from when we were buying things who got a $75,000 settlement. We recast his loan instead of refinancing it at a 4.25% rate (this was when rates were going up toward 6%). He cut years off the schedule and almost $400 a month off his payment. He made a smart choice.
If you put down less than 20% on a conventional loan, the lender will require private mortgage insurance. PMI protects the lender if you don't pay back your loan. This is a trade-off that lets people with smaller down payments buy a home. PMI usually adds 0.46% to 1.5% of the amount of your loan to your yearly borrowing costs.
Current industry data shows that this means $120 to $280 per month on a $400,000 mortgage. You could use that money for other financial goals.
You need at least 20% equity in your home and an 80% loan-to-value ratio to get rid of PMI. After you reach that point, you can ask to cancel. If your home has gone up in value because of improvements you've made or because the market has gone up, you might be able to get to 20% equity faster than you thought by refinancing to a new conventional loan.
The Consumer Financial Protection Bureau says that federal law protects PMI in certain ways:
Automatic termination: Lenders must automatically cancel PMI when your principal balance reaches 78% of the home's original value or halfway through your loan term (15 years on a 30-year mortgage), whichever comes first.
You can ask for PMI cancellation once your loan-to-value ratio reaches 80%. This usually means getting an appraisal to confirm the current value of your home.
Requirements for seasoning: Some lenders will only let you remove PMI based on appreciation alone if you have made at least two years' worth of on-time payments. You might not have to wait this long if you've made big changes.
If you got an FHA loan after June 3, 2013, you probably have to pay monthly mortgage insurance premiums (MIP). Most FHA loans require borrowers to pay MIP to protect the lender. This makes it easier for people who can't afford a 20% down payment to get a loan.
There are two kinds of MIP for FHA loans: an upfront fee of 1.75% of the loan amount and annual MIP that is paid in monthly installments. People who put down less than 10% must pay MIP every year for the whole loan term. According to HUD rules, if your down payment is more than 10%, you only have to pay MIP for 11 years.
You can only get rid of MIP on current FHA loans by refinancing them into a regular loan. To avoid PMI on the new loan, you need at least 20% equity. To get conventional financing, you usually have to meet stricter requirements, like having a higher credit score. Usually 620 is the lowest, but 740 or more gets you the best rates.
Sometimes, especially if you don't have 20% equity or your credit scores need to get better, you can't get rid of PMI through regular refinancing.
Another option is lender-paid mortgage insurance. With LPMI, the lender doesn't charge you extra for mortgage insurance; instead, they include the costs in your interest rate. This method can lower your monthly payment, but you'll have to pay a little more interest, usually between 0.25% and 0.5%.
This is the trade-off: you pay less each month, but you might end up spending more over time. You can't cancel LPMI like you can with regular PMI. It stays with your loan for the whole term. The only way to get rid of it is to refinance again later. If your credit score is low, that higher rate might make this option more expensive overall than traditional PMI, which you can get rid of later.
Extending the term of your loan is another way to lower your payments. If you qualify, you can do this by modifying your loan or refinancing into a mortgage with a longer term.
If you spread your loan balance over a longer period of time, like 30 years instead of 15, your monthly payment will be much lower. But there is an important warning that comes with this: you'll pay a lot more interest over the life of the loan.
Let's look at a real-life example. You still owe $250,000 on a 15-year loan at 5.5% interest, and your monthly payments are about $2,044. If you refinance to a 30-year term at 6.12%, which is the average rate right now, your payment goes down to about $1,513, which saves you $531 a month.
That's a lot of extra space in your budget. But no one talks about this: you'll pay about $294,680 in interest over the course of 30 years. The total interest would only be $117,920 over the 15-year term. For the lower monthly payment, that means $176,760 more in interest costs.
If you're really having trouble with your monthly cash flow or if you can invest that $531 in a way that earns more than your mortgage interest rate, this plan makes the most sense. But for most people, keeping the shorter term (if possible) saves money in the long run.
Homeowners insurance pays you back for damage and losses to your home caused by things like fires or burglaries that you didn't expect. Most lenders will only give you a mortgage if you have insurance. Finding a lower rate directly lowers your total housing costs because your insurance premium is usually added to your monthly mortgage payment through escrow.
According to NerdWallet's research, the average cost of homeowners insurance in the US will be $2,110 per year, or about $176 per month, for $300,000 in dwelling coverage. But rates can be very different depending on where you are and what you need.
LendingTree's research shows that home insurance rates have gone up by 40.4% across the U.S. over the past six years. The biggest jumps happened in 2023 and 2024, when rates went up by 11.0% and 11.4%, respectively. Oklahoma ($6,210 a year), Texas ($4,585), and Nebraska ($4,505) have the highest costs. Hawaii ($610), Vermont ($950), and Delaware ($1,025) have the lowest costs.
Get quotes from several insurance companies and ask them to give you quotes based on your current coverage levels. Different insurance companies can charge hundreds or even thousands of dollars more or less for the same coverage.
Ask about discounts: Many insurance companies will give you a break on your premium if you have a security system, a new roof, live in a low-risk area, or even if you work in a certain field. My wife helped me figure out that I could save about $300 a year by combining my home and auto insurance.
Check your coverage to make sure you aren't overinsured. You might be paying for insurance that you don't need. You might want to lower your personal property coverage if you've paid off expensive things or gotten rid of some of your stuff.
Raise your deductible: A higher deductible means a lower monthly premium. Changing your deductible from $500 to $2,000 could save you about $500 a year. Make sure you can pay the deductible if you need to file a claim.
Raise your credit score: In most states, insurance companies use credit scores to set rates. Over time, improving your credit can help you pay less for insurance.
I understand, okay? Shopping for insurance isn't very exciting. But taking the time to compare quotes could save you $50–100 a month, which adds up to $600–1,200 a year. That's a good amount of money for a vacation.
Property taxes help homeowners help their communities by paying for schools, parks, roads, and emergency services. A lot of homeowners pay their property taxes through escrow accounts set up by their mortgage lenders. Your monthly mortgage payment will go down if your property taxes go down.
The value of your home and the tax rate in your area will determine how much you have to pay in property taxes. If you think your home is worth more than what it is worth on the market, you might be able to file an appeal to lower your tax bill.
Check your tax statement for mistakes like the wrong square footage, number of bedrooms or bathrooms, or lot size. I've seen mistakes on assessments that are small, like showing 3 bedrooms instead of 2, and big, like listing a basement that doesn't exist.
Look into comparable sales: Find out about homes that have sold recently in your area that are similar to yours. If similar properties sold for less than what you think yours is worth, you can appeal.
Go to the website of your local tax office to find out when appeals are due and how to do them. Most places have specific time frames for filing appeals, which are usually 30 to 90 days after you get your assessment notice.
Get the paperwork you need: Get recent appraisals, pictures of your home's condition, and data on sales of homes that are similar to yours. The most important appraisals are the ones done by professionals, but they cost $300 to $500.
Send in your request for an abatement. Most places let you do this online, but some require you to send it in by mail or in person.
It usually takes 30 to 90 days for a decision to be made. You will get a message letting you know if your taxes will go down.
Keep in mind that appealing property taxes doesn't happen right away. But if you have strong proof that your assessment is higher than the market value, it's worth going after. If you win your appeal, you could save hundreds or thousands of dollars on your taxes every year, which means you'll save money every month.
One thing to think about is that even if your appeal is denied, going through the process will help you understand your assessment better when it's time for the next review cycle. And this is something no one told me when I bought my first house. In some places, your assessed value goes up by a certain percentage every year unless you fight it.
There are a number of loan assistance programs that can help homeowners who are having trouble making their mortgage payments. There are ways to get help with money problems, whether you need it for a short time or a long time.
If you're having trouble making your mortgage payments, state and local programs might be able to help. Programs differ from place to place, but it's a good idea to see what's available in your area.
Where to get help with a government mortgage:
Many states and cities have programs to help homeowners who need help with their payments on their websites. These could be things like short-term help with payments, programs to lower the principal on a loan, or help with refinancing a mortgage that is underwater.
Nonprofits: Organizations like NeighborWorks America and local housing counseling services help homeowners find relief programs. These groups often offer free counseling to help you figure out what to do.
Housing counselors from HUD: The U.S. Department of Housing and Urban Development offers free housing counseling services. Counselors who are approved by HUD can help you figure out what works best for your situation and go over your options with you. You can find counselors who have been approved by HUD by going to www.hud.gov or calling 1-800-569-4287.
Asking your lender about relief programs is another way to get help. Some lenders change the terms of your loan for a short time so you can catch up on payments. Mortgage forbearance is a common option that temporarily stops or lowers your mortgage payment.
Forbearance doesn't get rid of what you owe; it just pushes payments back. This gives you some time to figure out your finances and get back on your feet. The Mortgage Bankers Association says that as of early 2025, about 0.22% of homeowners were in forbearance plans. This is a big drop from the pandemic highs, but it still means that thousands of families are getting the help they need.
First, call your servicer and tell them about your money problems.
Review period: Your lender looks at your situation and decides if you qualify
Forbearance period: Payments are lowered or stopped for a set amount of time, usually 3 to 6 months at first.
Plan for repayment: After forbearance ends, you'll need a plan to pay back the missed amounts, either by extending the terms, making a lump sum payment, or changing the loan.
People often say bad things about forbearance, but it really did help hundreds of families I worked with during the pandemic. The most important thing is to realize that this is only a short-term fix while you look for more permanent ones.
When you're ready to look into refinancing to lower your mortgage payment, AmeriSave has a number of loan programs that can help homeowners save money each month. We can often move faster than traditional banks and offer competitive rates because we are a direct lender.
AmeriSave is an expert in:
Rate-and-term refinances let you get a new loan at today's lower rates to pay off your current mortgage. This lowers your monthly payment and total interest costs.
Cash-out refinances: Get cash from your home's equity and maybe get a lower interest rate than you have now.
FHA streamline refinances: A simpler way for current FHA borrowers to refinance that requires less paperwork.
VA Interest Rate Reduction Refinance Loans (IRRRL): A simple way for veterans and active-duty military members with VA loans to refinance, usually without needing an appraisal.
You can do the whole application process online, and many borrowers get their first approval decisions in just a few minutes. Our loan officers will help you figure out the best way to refinance your loan based on your unique situation and your financial goals.
There are many ways to lower your monthly mortgage payment, such as refinancing, recasting, shopping for insurance, or getting help in other ways. These methods can help you make more room in your budget for other important financial goals, such as saving for emergencies, paying off high-interest debt, or putting more money into your retirement account. What works best depends on how much money you have and the terms of your mortgage.
As of November 2025, mortgage rates are in the low 6% range. Homeowners who locked in mortgages during the high-rate years of 2023 and 2024 have real chances to save money. If you lower your $300,000 mortgage by just half a percentage point, you'll save about $90 a month, or $1,080 a year.
Hey, here's a challenge for you: do the math. Look at what you're really paying each month, compare it to current rates, insurance quotes, or your property assessment, and see where you can save money. We can miss clear ways to save money when we're too busy with our daily lives. I know what you mean. Taking care of a newborn, helping my wife's cousin with his needs, and trying to keep up with work doesn't leave me much time for financial housekeeping. But if you spend one Saturday afternoon on this, you could save thousands of dollars this year alone.
If refinancing sounds like a good idea, look into your options to see how much money you could save. Getting quotes, appealing your assessment, or applying for refinancing are all steps you can take to get closer to the financial breathing room you need.
Closing costs for refinancing usually range from 2% to 5% of the amount of your loan. That comes out to $6,000 to $15,000 on a $300,000 mortgage. But you can often add these costs to your new loan balance or pay for them with lender credits that come with a slightly higher interest rate. To find out how long it will take to make up for the upfront cost, divide your closing costs by your monthly savings. This will give you your break-even point. Refinancing usually makes sense if you plan to stay in your home longer than the break-even point. Remember that refinancing also resets the length of your loan. This means that if you refinance from a 30-year mortgage to a new 30-year loan, you are extending the time it will take to pay off your loan unless you choose a shorter term or make extra payments.
You usually need at least 20% equity (an 80% loan-to-value ratio) to ask for PMI cancellation. Some lenders will let you remove PMI if you've made major improvements to your home that raised its value and an updated appraisal shows enough equity. Your PMI will automatically end when your loan balance reaches 78% of the original purchase price or halfway through the loan (15 years on a 30-year mortgage), no matter how much equity you have. Remember that most lenders will only let you remove PMI after two years of seasoning, but this rule can sometimes be broken for major renovations. The appraisal itself usually costs between $300 and $500, and you must be up to date on your payments and not have made any late payments recently in order to qualify for early removal.
With a loan modification, you change the terms of your current mortgage instead of getting a new one. Changes could change your interest rate, lengthen your loan term, or change it from an adjustable to a fixed rate. To get a modification, lenders usually want proof of financial hardship. The process is less paperwork-heavy and costs less than refinancing. Refinancing, on the other hand, gives you a new loan to pay off your old mortgage. This usually means having to show proof of income, have your credit checked, and have your home appraised. Refinancing lets you choose new terms more easily, but it also comes with standard closing costs. If you're having short-term money problems, modification might be a better option. Refinancing is usually a better option if you want to take advantage of lower market rates or change the terms of a big loan.
Even if you're happy with your current homeowners insurance, financial experts say you should shop around for it every one to three years. Insurance companies change their rates all the time based on how many claims they get, how likely natural disasters are to happen, and how the market is doing. This means that the company that gave you the best rate three years ago might not be the best deal today. You should also shop around for insurance when you make big changes in your life, like fixing up your home, paying off your mortgage, or putting in security systems. It usually only takes a few hours, and it could save you hundreds or thousands of dollars a year. When you compare quotes, make sure that the coverage limits and deductibles are the same so that you can get an accurate price comparison.
No, your assessor won't raise your property's value in the future if you appeal your property tax assessment. In fact, successful appeals can set more accurate baseline values for the years that follow. You have the legal right to appeal an assessment, and assessors must treat all properties fairly, no matter how many times they have been appealed. The appeal process often finds mistakes in the assessments that are fixed and stay that way for future tax years. But even if you don't appeal, regular changes in the market and improvements to your property can still raise future assessments. In markets where prices go up quickly, many homeowners find that they need to appeal every few years to keep their assessments in line with what the market is really worth.
Your credit score won't change if you recast your mortgage because you're not applying for new credit or closing your current account. You're just paying off the principal on your current loan and asking your lender to figure out how much your monthly payment should be based on the lower balance. There are no credit checks involved in the process, and your mortgage account continues to report to credit bureaus with the same account history. If you're using a home equity line of credit or credit cards to manage your money, making the big principal payment needed to recast may actually improve your credit utilization ratio. The only thing to think about when it comes to credit is making sure that the big payment doesn't use up emergency funds that you might need later, which could mean you have to use high-interest credit later. Most financial experts say that even after making a recast payment, you should still have 3 to 6 months' worth of expenses saved up for emergencies.
Your old lender will close your current escrow account and send you a check for the remaining balance, usually within 20 to 30 days of paying off your loan. Your new lender sets up a new escrow account, and to build up a good reserve, you usually have to pay several months' worth of property taxes and insurance premiums in advance at closing. This could add thousands of dollars to your closing costs, but it's basically money you'd be paying anyway, just collected up front. If you refinance with the same lender, they might move your escrow balance to the new loan. This could lower your costs up front. Remember that escrow analysis happens once a year, and your monthly payment may change based on how much your taxes and insurance actually cost compared to how much you thought they would. When their first escrow analysis shows they were underescrowed, some borrowers get "payment shock." This means they have to make a higher monthly payment or a one-time catchup payment.
Yes, there are several ways to lower your mortgage payments without refinancing or recasting. If you have 20% equity, you can get rid of PMI and save $100–300 a month. You might be able to save $50 to $150 a month by shopping around for lower homeowners insurance rates. If you successfully appeal your property tax assessment, your monthly escrow payments could go down by $50 to $200, depending on how much your taxes go down. Paying more toward the principal over time lowers your balance naturally. You might also be able to get rid of mortgage insurance once you reach certain loan-to-value levels. If you sign up for a biweekly payment plan (paying half your mortgage every two weeks instead of once a month), your scheduled payment won't change, but you'll make 13 payments instead of 12, which will save you a lot of money on interest and shorten the length of your loan. When used together, these methods can save you a lot of money each month without the hassle and cost of formal refinancing.
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