by Aidan Kang, CFA
Senior Writer
UPDATED: August 03, 2021

In today’s time, it isn’t easy to earn money. During the past year, the pandemic caused a significant drop in our world economy. 2020 left behind millions of people to struggle mentally, emotionally, physically, and of course, financially.

With that, it might come in helpful to save and reduce spending. One such way is to lower your mortgage payment. Fortunately, there are certain ways to do this, and we have efficiently prepared all the tips and tricks you’ll need!

What is a Mortgage?

A mortgage is defined as a debt instrument or loan provided by a bank or mortgage lender. It will allow an individual to buy a property or a house. The borrower is then obliged to pay the amount back with a prearranged set of payments at a specified time frame. 

In acquiring a Mortgage, there are going to be rates of interest. These are known as Mortgage Rates, which are decided by the lender. It can either be fixed-rate–a specific rate till the end of term–or variable rate–fluctuates with a benchmark rate of interest. The rates would vary for every borrower, depending on their credit profile. 

These rates are a primary consideration for buyers wanting to purchase a new house with a mortgage loan. The collateral for a mortgage would be the house itself, so it is important to pay it back at the given time frame.

Individuals and Businesses may use mortgages if they want to make large estate or property purchases if they prefer not to pay the entire amount upfront. 

Types of Mortgage

There are multiple types of mortgage you can choose from! Below are just two of the most common ones. 

Fixed-Rate Mortgage

This type of Mortgage provides the borrowers with an established and fixed rate of interest over a set of time. The most popular fixed-rate mortgages are the 30-year and the 15-year ones. However, there are shorter terms, such as 5 years, and much longer terms, such as 40 years and more. Stretching the payments would guarantee a lower monthly payment, but it does mean a bigger interest rate to pay.

Adjustable-Rate Mortgage (ARM)

As the name implies, it comes with an interest that is not fixed and guaranteed. They would change during the duration and life of the mortgage. The change involves factors such as market rates that would surely fluctuate the interest rate. 

9 Ways to Lower Mortgage Payment Without Refinancing

Having a high mortgage payment means needing a large income. And who wants to spend a lot? Below are nine effective and sure ways you can lower the mortgage payment without needing to refinance.

1. A Huge Down Payment

You should definitely consider making a large down payment when purchasing a home. That would entail a lower monthly mortgage. Putting down at least 20% would mean that you won't need to pay for private mortgage insurance. That will surely save you money for sure!

2. Extending the Repayment Term

Another simple and efficient way to lower your mortgage would be extending the house's repayment term or period. This is also referred to as re-amortizing or re-casting. No need to refinance as most lenders would offer this service for about $250. Be warned that you will be paying a larger interest doing this. 

3. Consider an Interest-Only Mortgage

There are two stages in an Interest-Only Mortgage; the first phase and the second phase.

The first phase is when you would only pay the interest of the loan. The time period is decided and determined by the lender. For instance, the first 5 years of your 30-year mortgage, you would pay only the interest. The second phase includes paying off the actual principal of your loan, plus the interest.

Those first several years would mean a low mortgage payment for you. Take note that this is only a temporary way to lower the mortgage payment. 

4. Renting Out Part of the Home

When you find yourself in a bit of financial trouble; renting parts of your home is always an option. It might not be an ideal solution or scenario for most people, but it does work. Having a tenant would reduce the monthly mortgage payment. 

5. Paying your PMI

There is an option of paying upfront the Private Mortgage Insurance if you choose not to put down 20%. You can pay for your PMI one-time instead of having to pay the extra year after year.

6. Home's Tax Reassessment

In the case of your home loan having an escrow, you might notice that property taxes will take up a good chunk of your mortgage payment. You can request a reassessment by filing with your county and requesting a hearing with the State Board of Equalization. If approved, your taxes will be reduced, along with your monthly mortgage. 

7. Increase Credit Score

The interest rate for your mortgage is actually tied to your credit rating. Having poor credit would mean a higher interest rate or a lower chance of being eligible to refinance. You can improve your credit rating by acquiring more credit scores. You can do so by paying down card balances, removing your collection accounts or late payments, and being a member. 

8. Federal Loan Modification Programs

There are several federal loan modification programs if you want to reduce your mortgage payment. You can contact your lender and see if they can assist you, but note that you have to meet every requirement to qualify.

9. Getting Rid of your PMI

PMI is there to protect the lenders in the case of defaults or sudden withdrawals by borrowers. To get rid of your PMI, you would first have to repay enough to have at least 20% equity of the house. You can ask your lender to drop the PMI by then. 

Lowering the mortgage payment requires work on your part. There are also ways to lower your mortgage payment with refinancing if that is what you prefer. Good thing there are several ways to do this. You need to find the best option for you!