How to Reduce Your Mortgage Monthly Payment: 5 Easy Tips

You can reduce your mortgage monthly payment without having to give up your dream home. Many Americans wish they could keep more money in their pockets each month instead of sending it all to the bank. Think of it like finding a way to make your piggy bank lighter, so you have more to save for something special.

Currently, many families are seeking ways to lower their monthly mortgage payments. Why? Housing costs have become expensive. According to recent data, the average American spends almost 30% of their monthly income on mortgage payments. That’s like spending three out of every ten dollars you earn on your house.

Additionally, more than 60% of homeowners say they would feel less stressed if they could lower their monthly housing costs. Learning how to reduce the monthly mortgage payment is something many people care about.

How to Reduce Your Mortgage Monthly Payment

In this blog post, we’ll walk through five simple tips that can help you reduce your mortgage monthly payment starting today. Each tip is easy to understand, like showing how to build a LEGO castle.

By the end, you’ll know exactly what actions to take to keep more money in your wallet every month while still enjoying your wonderful home. Here are five proven tips that can help you lower your monthly mortgage payment and keep more money in your pocket:

1. Refinance Your Mortgage

What is refinancing? It occurs when you obtain a new loan with better terms to replace your existing one, which can help you lower your monthly mortgage payment.

How Does Refinancing Help You Save Money?

When you refinance, you’re asking a different lender to provide you with a new loan with a lower interest rate. Interest is like the extra money you pay on top of what you borrowed. It is a small borrowing fee.

When the interest rate decreases, your monthly payment typically decreases as well. For example, if you’re paying $2,000 every month, refinancing might help you reduce your mortgage monthly payment to $1,500. That’s $500 extra in your pocket each month to spend on groceries, family fun, or savings.

When Is the Right Time to Refinance?

Refinancing works best when interest rates in the country are lower than when you first got your mortgage. Also, if you’ve been paying your bills on time, refinancing can be an excellent way to reduce your monthly mortgage payment.

2. Extend Your Loan Term

A loan term is how many years you have to pay back the money you borrowed for your house. Think of it like choosing between reading a short book or a long book. The short book means you read more pages every day, while the long book means you read fewer pages each day.

How Does Extending Help Lower Payments?

If you currently have a 15-year mortgage, switching to a 30-year mortgage means you’re spreading the same amount of money over more months. As a result, each monthly payment becomes smaller. It’s like dividing a pizza into more slices. Each slice will get smaller, but you still get the whole pizza in the end.

What is The Trade-Off to Consider?

Extending your loan term will reduce your monthly mortgage payment, but you’ll end up paying more money in the long run. Why? Because you’re borrowing the money for a longer time. Many families choose this option. The extra money each month helps them cover other expenses, such as food, healthcare, and education.

3. Remove Private Mortgage Insurance (PMI)

When you first buy a house and don’t have enough money saved up for a big down payment, the bank makes you pay extra insurance every month. This insurance protects the bank if you are unable to make your payments. Think of it like wearing a helmet when you ride a bike. It’s there in case something goes wrong.

How Do You Get Rid of PMI?

Once you’ve paid off enough of your mortgage and you own at least 20% of the value of your home, you can ask the bank to remove this insurance. Eliminating PMI is a way to reduce your monthly mortgage payment without making any changes to your loan.

Checking the Value of Your Home

Your home might have increased in value since you bought it. You might already own more than 20% of the value of your home, even if you haven’t paid down much of your mortgage. Get a professional to figure out the worth today, and then request to reduce your monthly mortgage payment by removing PMI.

4. Appeal Your Property Taxes

Property taxes are money you pay to your local government every year because you own a house. It helps pay for schools, parks, and roads in your community. Usually, this tax is in your monthly mortgage payment. So lowering it will reduce your monthly mortgage payment.

How Are Property Values Determined?

The government decides how much property tax you pay based on what it thinks your house is worth. Sometimes, they overestimate your property. If they value your property more than it’s worth, you pay more taxes than you should.

What is the Appeal Process?

You can file something called an appeal. It shows the government that they made a mistake about the value of your house. If you win your appeal, they’ll lower your property taxes, which will reduce your monthly mortgage payment. All you need to do is gather information about what similar houses in your neighborhood are worth and fill out some paperwork.

5. Make Bi-Weekly Payments Instead of Monthly Payments

Instead of paying your mortgage once a month, you pay half of your monthly payment every two weeks. How can it help you reduce your monthly mortgage payment? Well, we will explain it.

The Math Behind Bi-Weekly Payments

There are 52 weeks in a year, which means 26 bi-weekly periods. When you pay half your mortgage every two weeks, you’re actually making 26 half-payments per year. It equals 13 full monthly payments instead of 12. That extra payment can go toward reducing the principal amount.

What are the Long-Term Benefits?

This strategy helps you reduce the monthly mortgage payment in the future because you’ll pay off your loan much faster. You’ll pay less interest over time because you’re shrinking the loan faster. For instance, you can pay off a 30-year mortgage in 25 or 26 years with bi-weekly payments.

How Do You Get Started with Bi-Weekly Payments?

Contact your mortgage lender and ask if they offer a bi-weekly payment program. Most banks do, but might charge a small setup fee. You can also set this up yourself by dividing your monthly payment in half and sending that amount every two weeks. Notify your bank to apply the extra contribution to your principal balance.

Conclusion

Learning how to reduce your monthly mortgage payment doesn’t have to be scary. You can refinance to get a better interest rate, extend your loan term to spread payments, remove PMI, appeal your property taxes, and switch to bi-weekly payments to pay off your loan faster.

Each of these tips offers a unique way to reduce your monthly mortgage payment. The best choice will depend on your specific situation and financial goals. You might combine two or three to serve your needs. Even small reductions in your monthly payment can add up to thousands of dollars over time.

Start by calling your mortgage lender today and asking which of these options might work for you. Take control of your mortgage and work to reduce your monthly mortgage payment. Your future self will thank you for the extra money you’ll have to invest in building savings and living with less financial stress.