Yes, it is possible to lower your mortgage payments! You can do so by refinancing for a lower interest rate, making a bigger down payment, or modifying the loan terms. You can also make extra payments toward your mortgage principal to lower the amount you pay each month. Let’s take a closer look at some of these strategies:
- Refinance your mortgage. Refinancing to a lower interest rate can significantly reduce your monthly payments. It can also result in substantial savings over the full life of the loan. However, in a rising-rate market, refinancing to a lower rate may not be an option.
- Make a large lump sum payment. Making a large lump-sum payment towards your principal and then recasting your mortgage (i.e. having your lender adjust your monthly payments) can reduce your monthly commitments without changing the interest rate or loan term. There may be restrictions on the number of times you can recast your loan.
- Restructure/modify your loan. This allows the lender to adjust the terms of the loan to make it more affordable by extending the loan term and/or lowering the interest rate. There may be restrictions on the number of times you can modify your loan.
- Make extra payments. Making an extra mortgage payment will not lower your monthly payment, but it will reduce the total interest you will pay over the term of your loan. Making an extra payment every year could result in substantial savings and enable you to pay off your loan before the term ends.
- Extend your mortgage term. With this option, you refinance your existing mortgage with a new mortgage with a longer term. This can lower your monthly mortgage payment by spreading the remaining loan amount over a longer repayment period. While this can lower monthly payments, you will end up paying more interest over the life of the loan. You may be required to show you suffered a hardship that impacts your ability to make your payment with this option. Examples of hardship may include divorce, job loss, or illness.
Understanding how to lower your mortgage payment can lead to significant financial benefits. A lower monthly payment eases any budget constraints, allows for better cash flow management, and increases savings opportunities. Be sure to consult with your lender to understand your options and if there are any associated penalties.
Lydia R. McCollin, FCCA, FCA, is the Managing Director of LRM Consulting Services Inc.
Do you have a question about saving, budgeting, investing, borrowing, planning for retirement, or anything related to personal finance? Pose it here. You can also visit our MoneySmart hub for more articles, videos, and tips on how to secure your finances.
