How to Lower Your Mortgage Payment When It’s Too Much To Handle

Ben Allen

It’s likely that paying your mortgage accounts for a major portion of your income. It’s suggested by experts that the maximum size of your monthly payments should be 30 percent of your monthly income. Yet, life happens, and things change. Your mortgage might rise, you get a new job that pays less, or you end up getting a two income home in a divorce.

It’s quite possible to end up with a mortgage that is beyond your financial abilities. Luckily, there are options to help with a mortgage, including lowering your payments. Here are some different ways to lower your mortgage and make your monthly payments more manageable.

Table of Contents

Refinancing Monthly Payments

Refinancing your mortgage is a great way to lower your monthly payments if you have good credit. Basically, you are taking the amount of money you still owe on your home and stretching it out over a longer time period. So, for example, instead of having your home paid off in ten years at your current rate, you pay less every month and get it paid off in 20 years.

So, if you have good credit, work with your current lender or find a new one that can refinance your mortgage loan. Refinancing can lower the amount of principle you have to pay each month, renegotiate your interest rate, or even get you into a different kind of loan.

Be aware though that refinancing does often mean paying off the debt for longer. While your monthly payment may be smaller, that does mean being in debt for several more years, and probably paying more overall. If you have a poor credit score, refinancing might not be an option for you until you repair your credit. There are ways to lower costs without refinancing your home, but it is a very useful tool to consider.

Get Rid of PMI

Private mortgage insurance (PMI) is a required form of insurance that the home purchaser must buy that protects the lender in case the borrower doesn’t pay. It’s an extra cost that is usually added when somebody buys their first home and doesn’t have a full down payment. PMI can be paid either as a monthly premium, an upfront cost at closing, or both. If you pay a full down payment of 20 percent of the mortgage loan, you aren’t required to have PMI.

In order to get rid of PMI, you have to pay off 20 percent of your mortgage loan. Once you reach that point you need to contact both the lender and the insurance company to cancel it. If you don’t do that, often PMI will stay as a monthly cost. It requires you to do the work of cancelling it.

Downsizing Your Home

If your home is outside of your financial means, then it’s a good idea to find one that works for you. Downsizing to a more affordable home is a very sensible decision, especially if your current mortgage is way out of your range. Plus, when you sell your current expensive home, hopefully you’ll have enough money for a large down payment on a smaller home.

The key to downsizing is to find a place that is still large enough for your needs with enough bedrooms and bathrooms for your family size, but within your new budget. Don’t base the size of your new home off of the furniture or possessions you have. A necessary part of downsizing your home is selling or storing things you can’t fit in the home so you can save money.

Again, the most your mortgage should ever be is 30 percent of your monthly income, but don’t base it solely off of that. If you have extra expenses, like a car loan or student debt, that take up more of your income, don’t take on a heavy mortgage. Shoot for a lower mortgage, that way you can save some money for the future.

If you are thinking about downsizing, a good place to start is to get pre-approved for a new home loan. A pre-approval won’t impact your current mortgage loan and is good for around 45-90 days. That way, you can get a sense of what kind of homes you can afford and how much money you could save.

Changing the Tax Assessment

Maybe the principle or interest isn’t what is killing you financially, but heavy taxes on your property are. Unlike refinancing your home or getting rid of PMI, lowering your taxes is a little harder, but it is possible.

Property taxes are determined by a government estimate of what they think your home is worth. Then, based on that amount, they decide how much to tax the homeowner. Yet, sometimes the value of homes can drop, but local governments don’t update their tax assessments.

If you think your home is overvalued in tax, you can challenge the current tax assessment. The process for this depends on where you live, but typically you file a request with the county government. Then, it’s possible you’ll have to attend a meeting where the assessors will ask for why you think your home is worth less.

Be prepared with information like recent sales of comparable properties (that are lower than your home’s worth) and even outside estimations on your home. If prices in your area and home size has dropped, it’s possible you will qualify for a lower property tax. Be aware though that there might be fees to pay for this process.

There are ways to lower your mortgage, but you need to do the work to find the best solution for you. Things like your credit score, local housing market, current financial situation, and more all influence what will best help you. Explore all of your options, meet with financial experts, and find what will save you the most money on your mortgage.

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