How to Lower Your Monthly Mortgage Payment
Refinancing, canceling mortgage insurance, forbearance and loan modification are ways to lower your monthly mortgage payment if it feels unaffordable.
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A common rule of thumb is to make sure your monthly mortgage payment doesn’t exceed 28% of your gross income. But for many homeowners who bought in recent years — when both mortgage rates and home prices soared — that benchmark has been hard to meet.
The numbers back this up. In 2024, the median mortgage payment reached a record high of $2,225 for buyers who financed a home in 2024, according to U.S. Census Bureau data. That’s up from $1,798 in 2019 — nearly a 24% increase. Meanwhile wages rose only a little over 26% between 2020 and 2024, according to Social Security Administration data.
The good news is that if your monthly mortgage payment is taking too big a bite out of your budget, there are ways you can bring that cost down to a more manageable level.
How to lower your mortgage payments
Refinance to a lower rate
While mortgage rates remain well above the historic lows we saw between 2020 and 2021 — and it’s unlikely rates will dip that low again anytime soon — they’ve dropped from their recent peaks. So if you bought a home with a 30-year mortgage when rates were around 7%, refinancing into another 30-year mortgage could lower your rate enough to deliver meaningful monthly savings.
Traditional guidance suggests refinancing is worth it if you can lower your rate by 1 percentage point. It’s possible to meaningfully lower your monthly payment with a 0.5- to 0.75-point decrease, depending on how much the refinance will cost you and when you’ll reach the break-even point on those costs.
For a conventional refinance, most lenders require you to have at least 20% home equity. You’ll also need to meet other lender requirements and be prepared to pay refinance closing costs.
Refinance to a customized loan term
While refinancing into another 30-year loan may lower your rate, it can also pile on additional interest charges, especially if you've been making monthly payments for a significant amount of time. However, you don’t have to reset the clock back to 30 years — you can keep your original payoff timeline while benefiting from the lower rate.
For example, if you’ve already paid down five years of your original mortgage, ask your lender to amortize the refinanced mortgage term over 25 years instead of 30. This customized option preserves your original payoff date and saves you from paying an extra five years of interest.
Recast your mortgage
If you don’t want to go through the cost and hassle of refinancing, ask your lender if they offer mortgage recasting.
With a recast, you make a one-time, lump sum payment toward your unpaid principal and your lender re-amortizes the loan based on the lower balance. Meanwhile, your mortgage rate and loan term remain the same.
The result? Not only do you have a smaller monthly payment, but lowering your remaining principal balance means you’ll pay less interest over the life of the loan.
A mortgage recast can also help you ditch mortgage insurance — allowing you to save even more every month — if your added principal pushes you past the 20% equity mark.
Apply for mortgage forbearance
If you experience a short-term financial setback and worry you’ll be unable to afford your monthly mortgage payment, a forbearance agreement may provide temporary relief.
During mortgage forbearance, your lender or loan servicer may agree to suspend or temporarily lower your mortgage payments for a specific period of time, usually not longer than 12 months. When the forbearance period ends, you resume paying the full monthly amount as normal and you’ll likely have to make up the excused amount in some way, such as through a repayment or payment deferral plan.
If you’re interested in forbearance, it’s important to contact your lender before missing a payment, not after.
Ask for a loan modification
If you've experienced a severe financial hardship and your mortgage payment is no longer affordable, a loan modification may be an option. Unlike mortgage forbearance, which is a temporary solution, a mortgage modification is a permanent restructuring of your existing loan terms to lower the monthly payment.
A mortgage modification is often an option after the forbearance period ends if you still need help affording your monthly payments, but you don’t necessarily have to have been in forbearance to qualify. To be eligible, however, you’ll need to show your lender evidence of significant financial hardship, such as an imminent reduction in income from job loss, divorce, major medical expenses or a natural disaster.
It's a good idea to reach out to your lender about potential loan modification in advance.
» MORE: What to do if you need help paying your mortgage
Eliminate mortgage insurance
All FHA loans and some conventional loans come with an added cost — mortgage insurance. Eliminating your mortgage insurance premium results in a lower monthly payment.
To rid yourself of paying the monthly costs associated with FHA mortgage insurance, you’ll typically need to refinance into a conventional loan and ensure you have at least 20% equity. Refinancing to a new FHA loan won’t remove the monthly insurance premium (MIP).
You may be able to refinance your FHA loan to a VA or USDA loan to eliminate MIP. Still, VA loans often require an upfront funding fee and USDA loans an upfront guarantee fee plus an annual fee, so you would need to compare the fees versus insurance costs to see if this type of refinance makes sense.
To cancel private mortgage insurance (PMI) — required on conventional loans when the down payment is less than 20% — you’ll need to contact your lender and prove you have sufficient equity. You can also refinance to get rid of PMI.