Are you wondering, “Why is my mortgage payment so high?”

Housing costs are one of the biggest expenses that we all take on. The monthly mortgage bill is usually the biggest chunk of expenses for any homeowner.

But there are some things you can do to lower the mortgage costs.

Here are 10 simple ways to reduce monthly mortgage payments.

1. Refinance the Mortgage

Refinancing is a great way that homeowners have been using since decades to reduce the monthly mortgage payments.

When you go for the refinancing option, you are essentially replacing the mortgage with a new loan. We recommend trying refinancing if the interest rates have recently gone down. It will mean that you have new loan terms with a reduced interest rate. Even a 1% decrease can result in major monthly savings.

However, you should know that applying and closing the new deal come with some fees. Closing costs can be anywhere from 2-6% of your total loan amounts. You should calculate if the savings are worth these upfront costs before going for refinancing.

2. Extend Your Loan Term

Extending the terms of your loans means that you will spread out your payments over a longer period. While you will be paying less every month, you will end up paying more interest on the loan. But it can be a saving grace for money to pay less every month.

3. Get Rid of Private Mortgage Insurance (PMI)

This advice is only for homeowners who paid less than 20% on their down payments. Due to your lower down payment, the lender most likely included the PMI to protect them against default. It can lie between 0.5-5% of the total loan amount annually.

The PMI is an additional cost that makes the monthly payments higher.
Once you have paid off enough to have 20% equity of the property, you can put in a request to remove the PMI. This will immediately lower your monthly payments, so make sure to check with your lender.

4. Make Extra Payments

Overpaying some of your monthly payments can actually be the best way to pay off your loan faster and reduce the interest you have to pay. It might not decrease your monthly payments, but it will decrease how much you end up paying overall. If you end up consistently paying more, you can also try refinancing later on to reduce your balance.

However, make sure to check in with your lender before overpaying. While most lenders allow overpay, there might be some limits or penalties.

5. Appeal Your Property Tax Assessment

Usually, homeowners have to pay property taxes along with the mortgage payments. If the property was over-assessed, you might be paying too much.

Go over your property tax bills to make sure that the original assessment was accurate. If the home has been overvalued, you can file for an appeal. If you manage to lower the property tax bills, it will reduce your monthly mortgage payments.

6. Shop Around for Homeowners Insurance

The homeowners’ insurance premiums are usually added to the mortgage payments. As with any insurance plan, the costs can differ based on which provider you have. To lower your monthly payments, try and shop around. Compare quotes from different companies to find a plan with lower premiums. Even small reductions can add up to amazing savings over time.

7. Consider an Adjustable-Rate Mortgage (ARM)

While fixed rates provide enough stability to plan finances, ARM can also provide temporary relief. ARMs come with lower interest rates initially, which means lower monthly payments during that time. However, once this period ends, your rate could increase. Do make sure to understand the risks of ARM loans before switching to them.

8. Pay Attention to Interest Rates

Keeping an eye on interest rates is important. They fluctuate all the time. When they drop, you might want to try refinancing or switching your mortgage plans. You can also try and renegotiate with the lender when they drop significantly. Timing it right can help you save a lot long term.

9. Ask Your Lender for a Loan Modification

A lot can go wrong in life. If you are going through unexpected hardships like new medical bills or job loss, you should reach out to your lender. They might be able to provide relief with loan modifications like adjusting loan terms, reducing principal amounts, or adjusting the interest rate. You will need to provide documentation that verifies your new financial circumstances. Some lenders may also put you on a trial plan before you are fully approved. You will have to follow it consistently though to get approval.

Do make sure that you reach out to the lender before missing any payments. This is important since it can impact negotiations and limit the possibility of penalties.

If you are able to qualify for loan modifications, it will definitely provide substantial relief.

Another plan can be to apply for forbearance. It can reduce or pause the payments for some time so that you can recuperate from your financial losses or look for a new job.

You should note that both of these options will impact your credit score. You should only try these options if you are going through a serious financial upheaval.

10. Reevaluate Your Budget

This advice isn’t directly related to the mortgage but it can be the most important step in reducing monthly payments.

Merely having more cash on hand to spend can be a huge relief. You can try cutting down on non-essential expenses or even renting out a room or your basement to someone.

Conclusion

So, why is my mortgage payment so high? It can come from high interest rates, property taxes or even insurance.

But as you can see, there are plenty of ways to lower it!