There are several ways to lower your monthly mortgage payment, but they do not all work the same way.
Some options keep your current mortgage in place. A mortgage recast may lower your payment after a large principal payment. Removing private mortgage insurance, or PMI, can reduce your monthly cost if you qualify. Other options replace or change the loan. A refinance creates a new mortgage, while a loan modification changes the existing mortgage when you are facing financial hardship.
The right move depends on your goal. If you want to reduce the payment without changing your rate, a recast or PMI removal may fit. If rates have fallen or you need a new loan structure, refinancing may help. If you cannot afford the payment because of hardship, a modification may be the better place to start.
Best Ways To Lower Your Monthly Mortgage Payment
| Option |
Best Fit |
Main Trade-Off |
| Recast |
You have cash to pay down principal and want to keep your current rate. |
You need a lump sum, and the interest rate does not change. |
| Refinance |
Current rates or loan terms are better than your existing mortgage. |
Closing costs apply, and restarting the term can increase long-term cost. |
| Remove PMI |
You have a conventional loan and enough equity to cancel mortgage insurance. |
Rules depend on loan type, payment history, value and servicer requirements. |
| Loan modification |
You are experiencing hardship and cannot afford the current payment. |
You usually need servicer approval, and the change may affect total cost or credit reporting. |
| Extend the term |
You want a lower payment and are comfortable paying over a longer period. |
You may pay more interest over time. |
| Rate buydown |
You are buying or refinancing and can use upfront funds to lower the rate. |
The upfront cost only makes sense if the payment savings justify it. |
Mortgage Recast
A mortgage recast may lower your monthly payment without replacing your current mortgage. You make a substantial principal payment, and the servicer recalculates the payment based on the lower remaining balance.
Fannie Mae and Freddie Mac are government-sponsored enterprises that buy mortgages from lenders and set many conventional loan guidelines. Fannie Mae describes a recast as a situation where the borrower pays a substantial principal curtailment after closing and the monthly payment is recalculated based on the new outstanding balance over the remaining loan term. Freddie Mac also addresses principal curtailments and recalculated payments in its conventional loan delivery requirements.
A recast keeps your existing interest rate and payoff schedule. It can be useful if you received a large sum, sold another home or want to lower your payment without going through a full refinance.
When A Recast May Make Sense
- You have a low interest rate you want to keep.
- You have cash available for a large principal payment.
- You want a lower payment without taking out a new mortgage.
- You do not need cash out.
- Your loan servicer allows recasting.
When A Recast May Not Make Sense
- You do not have a lump sum available.
- You want a lower interest rate.
- You want to shorten or extend the loan term.
- You need to access home equity as cash.
- Your loan type or servicer does not allow recasting.
Refinance To A Lower Rate Or Better Loan Structure
A refinance replaces your existing mortgage with a new mortgage. It may lower your monthly payment if the new loan has a lower interest rate, a longer term or a different loan structure.
Refinancing can be useful when market rates have dropped, your credit has improved, you want to move from an adjustable-rate mortgage to a fixed-rate mortgage or you want to remove a borrower from the loan. It can also help if you want to refinance out of FHA mortgage insurance into a conventional loan, if you qualify.
The trade-off is cost. Refinances usually involve closing costs, and restarting a 30-year term can reduce the monthly payment while increasing the total interest paid over the life of the loan.
When Refinancing May Make Sense
- Current rates are lower than your existing mortgage rate.
- Your credit or equity has improved enough to qualify for better terms.
- You want to change from an adjustable rate to a fixed rate.
- You want to remove mortgage insurance through a new loan.
- The monthly savings justify the closing costs.
When Refinancing May Not Make Sense
- Your current mortgage rate is much lower than today’s rates.
- You plan to sell before recovering the refinance costs.
- The lower payment mostly comes from restarting the loan term.
- You cannot qualify for better terms.
- The new loan increases your total cost more than you are comfortable with.
Remove Private Mortgage Insurance
If you have a conventional loan with PMI, removing it may lower your monthly payment without changing your mortgage rate or loan term.
The CFPB says borrowers generally can request PMI cancellation when the principal balance is scheduled to reach 80% of the home’s original value, and PMI generally terminates automatically when the balance is scheduled to reach 78% if the loan is current.
You can use our LTV calculator to get an idea of your current situation, although you'll need to connect with an expert to get an personalized picture.
PMI removal usually applies to conventional loans. FHA mortgage insurance follows different rules and may not be removable without refinancing, depending on your loan term, original down payment and loan-to-value ratio.
When PMI Removal May Make Sense
- You have a conventional loan with monthly PMI.
- You have paid down the loan enough to meet cancellation rules.
- Your home value has increased and the servicer allows value-based cancellation.
- Your payment history meets the servicer’s requirements.
- You want a lower payment without refinancing.
When PMI Removal May Not Work
- You have an FHA loan with mortgage insurance that cannot be canceled under your loan terms.
- You do not have enough equity yet.
- Your loan is not current.
- Your servicer requires a valuation and the value does not support removal.
- You have a second lien that affects the servicer’s review.
Loan Modification
A loan modification changes the terms of your current mortgage, usually because you are having trouble affording the payment. It is different from refinancing because you are not replacing the loan with a new mortgage.
The CFPB says a modification can reduce the monthly payment to an affordable amount and may involve extending the repayment period, reducing the interest rate, forbearing part of the principal balance or reducing principal in some cases.
A modification is usually a hardship option. If you can afford your current payment and simply want a better rate, refinancing or recasting may be more appropriate.
When A Loan Modification May Make Sense
- You are struggling to make the current mortgage payment.
- You have had a long-term income reduction or hardship.
- You want to avoid foreclosure.
- Your servicer says you may qualify for loss mitigation.
- A refinance is not available or would not solve the payment problem.
When A Loan Modification May Not Fit
- You are current and simply want a lower rate.
- You can refinance into better terms.
- Your hardship is short-term and forbearance or repayment options may fit better.
- The modified payment is still unaffordable.
- You do not understand how the modification affects the loan balance and payoff timeline.
Extend The Loan Term
Extending the loan term can lower your monthly payment by spreading the remaining balance over more years. This can happen through a refinance or, in a hardship situation, through a loan modification.
For example, refinancing from a 15-year loan to a 30-year loan may lower the monthly payment because the repayment period is longer. The trade-off is that you may pay interest for more years.
Extending the term can help with cash flow, but it should be compared against the total cost. A lower monthly payment can still be more expensive over time if the new term adds many years of interest.
When Extending The Term May Make Sense
- Your monthly payment is too high for your current budget.
- You want more cash-flow flexibility.
- You are comfortable with a longer payoff timeline.
- The total cost is still acceptable.
- You can make extra payments later if your budget improves.
When Extending The Term May Not Make Sense
- You are close to paying off the mortgage.
- You want to minimize total interest.
- The lower payment mainly comes from adding many years to the loan.
- You plan to keep the home long enough for the higher total cost to matter.
- You can afford the current payment without financial strain.
Buy Down The Interest Rate
A rate buydown lowers the mortgage interest rate by using upfront money. This is most common when you are buying a home or refinancing, rather than after you already have a closed mortgage.
The CFPB explains that discount points lower your interest rate in exchange for paying more at closing, while lender credits lower closing costs in exchange for a higher interest rate.
A permanent buydown lowers the rate for the life of the loan. A temporary buydown lowers the payment for an initial period, such as the first one or two years, before the payment rises to the full note rate.
When A Rate Buydown May Make Sense
- You are buying or refinancing and have funds available at closing.
- The lower payment helps your budget.
- You plan to keep the loan long enough to recover the upfront cost.
- A seller or builder is offering a credit that can be used for a buydown.
- You understand when the payment changes if the buydown is temporary.
When A Rate Buydown May Not Make Sense
- You expect to sell or refinance soon.
- The upfront cost is higher than the likely savings.
- The temporary payment is affordable but the later payment is not.
- You need the cash more for reserves or repairs.
- The buydown distracts from a home price or affordability issue.
Which Option Lowers Your Payment Without Refinancing?
Some payment-lowering options do not require a new mortgage.
| Option |
Requires A New Loan? |
How It Lowers The Payment |
| Recast |
No. |
Recalculates the payment after a large principal payment. |
| Remove PMI |
No. |
Removes the monthly mortgage insurance charge when requirements are met. |
| Loan modification |
No. |
Changes existing loan terms after servicer approval, usually due to hardship. |
| Refinance |
Yes. |
Creates a new loan with a different rate, term or structure. |
| Rate buydown |
Usually yes. |
Uses upfront funds at purchase or refinance to lower the rate. |
How To Choose The Best Way To Lower Your Mortgage Payment
Start by identifying why you want the lower payment.
If You Have Extra Cash
Ask about a recast. It may lower the payment without changing your rate, but you will need to make a large principal payment.
If You Have Enough Equity
Ask whether PMI can be removed. This may be one of the simplest ways to lower a conventional loan payment if you qualify.
If Rates Are Lower Than Your Current Rate
Compare refinancing. Make sure the monthly savings justify the closing costs and the new loan term.
If You Are Struggling To Make Payments
Contact your servicer about hardship options. A loan modification may be more relevant than refinancing if your income has changed or you are at risk of falling behind.
If You Are Buying A Home
Compare a rate buydown with a lower purchase price, seller credits and keeping more cash in reserves. A lower starting payment helps only if the full payment also fits your budget.
Costs And Trade-Offs To Compare
A lower monthly payment can help your budget, but the trade-offs matter.
- Closing costs.
- Servicer fees.
- Appraisal or valuation fees.
- Discount points.
- New loan term.
- Total interest cost.
- Mortgage insurance.
- Escrow changes.
- Whether the payment can rise later.
- How long you plan to keep the home.
- Whether the option affects your credit.
Do not judge an option only by the new monthly payment. A payment that is lower today may cost more over the life of the loan.
Common Mistakes To Avoid
Refinancing Just To Lower The Payment
A refinance can lower the payment by extending the term, but that does not always mean it saves money. Compare the total cost before replacing your current mortgage.
Ignoring PMI Removal
If you have a conventional loan and enough equity, removing PMI may lower your payment without a refinance.
Using All Your Cash For A Recast
A recast can lower your payment, but it ties up cash in home equity. Keep enough reserves for emergencies, repairs and other costs.
Confusing Forbearance With Forgiveness
Forbearance can temporarily pause or reduce payments, but the skipped amount is still owed. The CFPB says forbearance lets a servicer temporarily pause or reduce payments, and the borrower pays back the difference later.
Buying Down A Rate Without Calculating The Break-Even Point
A permanent buydown only helps if you keep the loan long enough for the monthly savings to outweigh the upfront cost.
The Bottom Line
The best way to lower your monthly mortgage payment depends on your situation. A recast may help if you have cash and want to keep your current rate. PMI removal may help if you have a conventional loan and enough equity. A refinance may help if the new rate or term improves your overall loan. A loan modification may help if you are facing hardship.
Extending the term or buying down the rate can also lower the payment, but both should be compared carefully. A lower monthly payment can come with upfront costs, a longer repayment timeline or higher total interest.
Before choosing, compare the payment savings with the fees, loan term, total cost and how long you expect to keep the mortgage.
Frequently Asked Questions
What Is The Best Way To Lower My Monthly Mortgage Payment?
The best option depends on your goal. Recasting may help if you have cash to pay down principal. PMI removal may help if you have enough equity. Refinancing may help if current rates or terms are better. A loan modification may help if you are facing hardship.
Can I Lower My Mortgage Payment Without Refinancing?
Yes. You may be able to lower your payment without refinancing by recasting your mortgage, removing PMI or getting a loan modification if you qualify.
Does A Mortgage Recast Lower Your Interest Rate?
No. A recast does not change your interest rate. It lowers the payment by recalculating the loan based on a lower principal balance.
Can Removing PMI Lower My Mortgage Payment?
Yes. If you have a conventional loan with PMI and meet cancellation requirements, removing PMI can lower your monthly payment.
Will Refinancing Always Lower My Payment?
No. Refinancing only lowers your payment if the new rate, term or loan structure creates a lower monthly cost. Closing costs and total interest still need to be considered.
Does Extending My Mortgage Term Save Money?
It may lower the monthly payment, but it can increase total interest because you repay the loan over more years.
What Is A Mortgage Loan Modification?
A loan modification changes the terms of your current mortgage, usually to make the payment more affordable during or after financial hardship.
Is Buying Down The Rate Worth It?
It can be if the upfront cost is lower than the payment savings you expect to receive while you keep the loan. Calculate the break-even point before paying for points or a buydown.
Can My Servicer Lower My Mortgage Payment?
Possibly. Your servicer may be able to discuss recasting, PMI removal, hardship assistance or loan modification options depending on your loan type and situation.
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