How to lower your mortgage payment

Most homeowners are paying more for their mortgage than they have to. Bankrate’s Hidden Homeownership Tax research found that the typical borrower overpaid by $3,343 a year in 2025 — $278 a month left on the table, money that could go toward savings, debt payoff or retirement instead. For purchase borrowers specifically, that annual overpayment climbs to $3,656.

Seven strategies can lower your mortgage payment, but they’re not created equal. Refinancing moves the needle the most if you locked in a high rate between 2022 and 2024. For other borrowers, especially those who can’t refinance yet or already have a competitive rate, the other strategies are the right first move.

How can I lower my mortgage payment?

Mortgage payments consist of four parts, often abbreviated as PITI: principal, interest, taxes (property) and insurance (homeowners and/or private mortgage insurance). Lowering your monthly payment means addressing one or more of these elements. Options to reduce mortgage payments include:

• Refinance to lower your interest rate
• Recast your mortgage
• Eliminate your mortgage insurance
• Modify your loan
• Lower your taxes
• Shop around for a lower homeowners insurance rate
• Apply for mortgage forbearance

Which strategy fits your situation?

The best way to lower your payment: Refinance to a lower interest rate

When you refinance your mortgage, you replace your current mortgage with a new one — typically to secure a lower rate, a shorter term or both. For borrowers who locked in between 2022 and 2024, refinancing is usually the highest-impact option on this list. But it resets your repayment clock, and it only pays off if you stay in the home long enough to break even. Both matter before you move forward.

The best available rates go to borrowers with a credit score of 780 or higher, a debt-to-income ratio below 43% and at least 20% equity. Below 780, you can still qualify, but expect a rate above the advertised average.

Several factors influence whether you’ll want (or be able) to refinance, including:

• Current refinance interest rates: Refinancing comes with closing costs — typically 2% to 5% of the loan amount, or $6,000 to $15,000 on a $300,000 loan — so the rate drop needs to be large enough to offset that upfront cost. Looking for a drop of at least 0.75 to 1 percentage point is a good rule of thumb. For most homeowners, this may be hard to find in the current rate environment, unless you bought between 2022 and 2024 when rates were near 8%. Get quotes from at least three lenders before deciding.
• How long you’ll stay in the home: Closing costs need time to be offset by monthly savings. If you plan to stay at least two to three years, a refinance will likely reach the break-even point. If you expect to sell sooner, crunch the numbers with Bankrate’s break-even calculator first; the savings may not materialize in time.
• Prepayment penalties: If your mortgage originated within the last three years, check whether it carries a prepayment penalty before you proceed. If it does, get the exact penalty amount from your servicer — it could wipe out a year or more of monthly savings and change the break-even calculation entirely. 
• Age of your mortgage: Many lenders require a waiting period of at least six months in your current loan before you can refinance. That said, if your loan is recent enough that its amortization schedule still includes interest-heavy payments, it may be worth refinancing.

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“The decision of whether to refinance comes down to the upfront closing costs and the length of time required to break even,” says former Bankrate financial analyst Stephen Kates.

If you don’t qualify for a lower rate outright, you can buy down the rate using mortgage discount points. Each point typically costs 1% of the loan amount and reduces your rate by 0.25%. That increases your upfront cost and extends the time needed to break even — factor that into your calculation before purchasing points.

Other ways to lower your mortgage payment

1. Recast your mortgage

Mortgage recasting means making a lump-sum payment toward your principal. Your lender then recalculates your monthly payment based on the new, smaller balance — on the same loan term. The result is a lower payment and less total interest, without a new loan or a new rate.

Here’s an example of your possible savings through a mortgage-recasting scenario:

You’ll need to come up with a large sum of money to apply to the balance, and your servicer must allow recasting — not all do. Most lenders that offer it charge a one-time fee of $250 to $500. Model your recast savings with Bankrate’s amortization calculator, and weigh the benefits against reserving that cash for emergency savings or other uses.

2. Eliminate your mortgage insurance

If you’re paying private mortgage insurance (PMI), find out whether you can drop it. Most lenders require PMI on conventional loans when the down payment is less than 20% of the purchase price. It costs homeowners 0.46% to 1.50% of the loan amount each month, depending on your credit score, according to the Urban Institute. However, you can request its removal once you have 20% equity in your home.

Let’s say you owe $250,000 on your mortgage, and you’re paying 0.5% PMI. That comes to $1,250 annually, or about $104 per month. So, eliminating your PMI payment would save you more than $100 per month.

Reaching 20% equity happens two ways: paying down the loan, or your home’s value rising enough to do it for you. Given how much home values have climbed in many markets, you may be closer than you think — a new appraisal, typically $300 to $500, can confirm it. Your servicer may also require that the loan be at least two years old before removing PMI.

3. Modify your loan

If you’re in financial distress, government loan modification programs can change the loan’s rate or term (or both) to make monthly payments more affordable. It’s similar to refinancing, but with the same loan rather than a new one.

For example, extending a 30-year mortgage into a 40-year term lowers your payment because it’s spread over an extra decade, but you’ll pay more interest overall. Extending a $250,000 balance from 30 to 40 years at 6.5% cuts the monthly payment by about $117 but can add roughly $134,000 in total interest over the life of the loan, depending on how far into repayment you already are.

Not every lender allows modifications, and eligibility rules are strict. If the payment reduction is small compared to the extra interest you’ll pay over the longer term, modification may cost you more than it saves — run both numbers with a counselor before signing anything.

4. Appeal your property taxes

Other methods that can reduce payments don’t involve the mortgage loan itself. You might try to bring down your monthly housing costs by lowering your property taxes. Tax assessments are sometimes too high following real estate market corrections or local rezonings, for instance. If that could be the case for your house, consider appealing your property’s value to the relevant state or local decision-makers. Be aware of deadlines for filing such an appeal.

If the home is your legal primary residence, you could also try applying for a homestead tax exemption. Rules vary by state, but if you qualify, an exemption can reduce your tax bill by sheltering an eligible portion of your home’s assessed value from taxes.

5. Look for a lower homeowners insurance rate

When was the last time you shopped around for homeowners insurance? Even if you haven’t had any issues with your current provider, better insurance rates may be available elsewhere.

Compare quotes from several reputable providers, and be sure to inquire about any available rate discounts. Review the quotes to ensure the coverages are comparable to your current policy, and ask about other ways to reduce your insurance costs, such as increasing your deductible.

6. Apply for mortgage forbearance

If you’re in serious financial trouble, talk to your lender about pausing payments temporarily. Mortgage forbearance can offer relief by lowering or pausing your payments for a short period. You’ll also avoid adverse credit reporting and foreclosure, as well as gain time to get your finances back in order.

Your lender will require proof of financial hardship before approving forbearance, and the relief is temporary. Every payment you miss, plus accrued interest, still has to be repaid — either as a lump sum or spread into a repayment plan that raises your monthly payment once forbearance ends.

Frequently asked questions

• What happens if I can’t pay my mortgage anymore?

  If you’re unable to pay your mortgage, contact your mortgage servicer immediately. That single phone call keeps more options available to you. Possible options for assistance through your lender include refinancing, loan modification, repayment plans, forbearance, short-selling your home, or giving your home back through a deed in lieu of foreclosure. You can also reach out to a HUD-approved housing counseling agency for free help in avoiding foreclosure.

  If you’ve already received foreclosure notices or legal papers, consult a housing attorney immediately. Many legal aid organizations offer free or low-cost representation. Foreclosure timelines vary by state; in some states, the process moves quickly.

• Does paying extra into escrow lower my monthly payments?

  No. Extra escrow contributions don’t reduce your required monthly payment and don’t apply to your loan principal. What they do is cushion against escrow shortages, which can be useful if your property taxes or homeowners insurance premiums go up. Any surplus is typically returned to you at your annual escrow review or rolled into the next year’s payments.

  If your monthly payment increased because of an escrow shortage, ask your servicer whether you can pay the shortage as a one-time lump sum rather than spreading the increase over 12 months.

• Will my mortgage payment go down if I pay extra?

  No, making extra payments on your mortgage does not reduce your monthly payment. Instead, additional payments applied toward your principal balance will help pay down the loan faster, shortening its term, but your monthly payment will remain the same.