How to Lower Your Mortgage Payments

by Ryan Guina

I was surprised the first time I saw our mortgage payment increase – after all, we had a fixed rate mortgage. And fixed rate mortgages should always have a fixed mortgage payment, right?

Well, they do. But we were also paying into escrow for our homeowners insurance and property taxes and after the first year there was a shortfall, so we had to pay an extra $40 or $50 each month to help make up for the escrow shortfall. We had enough room in our budget that it didn’t affect us too much. But not everyone has that kind of room in their budget. That experience got me thinking about how I could lower my mortgage payment, not only to help in times like these, but to pay it off more quickly.

How to Lower Your Mortgage Payment

lower your mortgage paymentIf you pay your mortgage through escrow and it includes your mortgage, property taxes, and homeowners insurance, then those are the areas you want to look at to reduce your mortgage payments. Let’s take a look at them to see if any of them will work for you.

Refinance your mortgage. The most permanent solution, and often the biggest win, is to refinance your mortgage at a lower interest rate. Interest rates right now are at or near all time lows, making this a great time to refinance your mortgage. You will have better success refinancing your mortgage if  you have 20% or more equity, and you will need a good credit score to refinance your mortgage. This is why having a high credit score is so important: reducing your interest rate by 1% can save you hundreds of dollars each month, and tens of thousands of dollars over the remainder of your mortgage. The good news is that having a mortgage can improve your credit score over time if you consistently make on time payments, making it easier to be approved for a refinance loan.

Challenge your property taxes. While I was researching the change in our mortgage payment I discovered our county had our property taxes listed incorrectly. They showed our house as having an extra bedroom and more square footage than it actually had. I challenged our property taxes and our home was reassessed, saving us several hundred dollars each year. Many counties only allow you to challenge your property taxes at certain times during the year, so be sure to look into the process.

Get new homeowners insurance quotes. Another way to slash your costs is to get quotes for a new homeowners insurance policy. You can lower your homeowners insurance rates by remaining with your current insurance provider and selecting a higher deductible, or you can shop around for lower homeowners insurance rates. Keep in mind that many insurance providers offer discounts for multiple policies, so you may be able to shop for other insurance policies at the same time and save even more money by bundling policies. Be sure to choose a deductible you can afford, otherwise saving a few bucks can cost you more than you bargained for.

Refinancing will save you the most money

Refinancing is the best option of these because it gives you immediate results (or as long as it takes to close on your new loan), and the results are typically larger and permanent if you get a fixed rate loan.

You may or may not receive immediate results by challenging your property taxes or getting a new homeowners insurance policy. It usually takes a few months before your next tax bill goes into effect, and in the mean time you will continue paying the old property tax rate into your escrow account. Homeowners insurance policies can take effect immediately, but some escrow companies prefer to wait until the end of the year to reconcile their accounts, so in the mean time you may continue paying the higher rate, which may result in an overage an refund the following year. But that’s better than the alternative of an increased mortgage payment!

Published or updated December 28, 2016.
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{ 14 comments… read them below or add one }

1 krantcents

All good ideas! I routinely look at my insurance and mortgage rates to see if it is worthwhile to make a change.


2 Ryan

I check our insurance about once a year, and property taxes every time they are assessed. Our old assessments were good for 3 years, and they it was fairly assessed, so I didn’t do anything about it. We are currently in the process of buying another home, so I’ll be sure to verify the assessment is in line with our purchase price.


3 Debt Donkey

Good tips all. It’s amazing how getting a better homeowner’s policy can reduce your monthly payments. I recently knocked about 23 bucks off my monthly payment just by shopping around and getting a better insurance policy deal. Maybe not much, but every little bit counts when you’re watching! Thanks.


4 Ryan

That’s over $250 a year. That’s a big win in my book! And it can make a huge difference when money gets tight. Thanks for sharing!


5 Ryan

It’s amazing to me that more people don’t challenge their property taxes. Many times you don’t even need a lawyer to do it, and can result in hundreds, even thousands in annual savings. Already planning to appeal mine for my newly purchased home!


6 Doable Finance

Property tax is a must to challenge. We all must take some time out to get the assessment corrected. Most of the time, they assess it way high.


7 Cheryl

My taxes on my house are down to around $1000 a year because of senior citizen discount. The bank is holding almost $5000 in escrow. Can I request some of this back? Can I get my payment to my escrow lowered? I could really use the money now that I am retired.


8 Ryan Guina

Cheryl, You will need to contact your lender regarding how much they require you to maintain in escrow. It is often based on your property taxes and homeowner’s insurance. They may also keep a small buffer above that amount. The buffer varies by company policy, and possibly by state laws. my recommendation is to contact them and ask about their policies and if any state laws may supersede their company policies. Best of luck.


9 Muriel Moss

What is the age for senior citizens discount on you property taxes and home owners insurance in the state of Virginia?


10 Ryan Guina

Hi Muriel, I can’t find anything for Virginia residents, only for west Virginia residents – see this article at Kiplinger’s. But it’s possible there is a discount I couldn’t find. You should contact your county registrar’s office for more information. Best of luck!


11 shell

Is there a limit on how high my mortgage payments can get? My mortgage has increased almost 200 dollars


12 Tim Olvey

Hi Ryan;
If I pay extra escrow, say $1200. And my taxes, insurance, and PMI stay the same. Will the mortgage administrator automatically readjust my mortgage to a lower mortgage payment?
If I did this each year, could my mortgage payment conceivably go down each year (if taxes, insurance, and PMI stay the same)?


13 Ryan Guina

Tim, in theory, they could adjust your payment downward a little bit, but you would reach a point where they wouldn’t decrease it any more, and you would run the risk of them decreasing it too much, causing there to be insufficient funds, which would increase your payments for the following year. The best thing is to have the payments be as close to the correct amount as possible. If you want to pay extra, it’s probably best to put it toward your principal so you can reduce the amount of overall interest you pay, and decrease the amount of time it takes to pay off your mortgage.


14 Tucker Adelblue

Hi There. First time commentor.

Pretty great advice, when I bought my home I paid 10k down and my payment with escrow was $550 a month. Now, nearly 4 years later, my payment has jumped up to 759 a year! When I called my bank to ask what was up they said it was due to insurance premiums increasing in my area. Is this not excessive?


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