A mortgage payment that has become difficult to manage can put pressure on your monthly budget. Fortunately, homeowners may have several ways to reduce housing costs, depending on their mortgage, equity, insurance, taxes, and current financial situation.
Before making a change, identify what is driving your payment. Your mortgage statement can help you separate principal and interest from escrow expenses such as property taxes and homeowners insurance.
Refinance to a Lower Mortgage Rate
Refinancing replaces your existing mortgage with a new loan. If you qualify for a lower interest rate, refinancing may reduce your monthly principal and interest payment.
However, a lower rate does not automatically make refinancing worthwhile. Compare the new interest rate, APR, closing costs, monthly payment, and loan term with your existing mortgage. Restarting with a longer term may lower the payment while increasing the amount of interest paid over time.
Rather than relying on a rule that rates must fall by a certain percentage before refinancing makes sense, calculate your potential savings and estimated break-even period based on actual loan offers.
See if You Can Remove Private Mortgage Insurance
If you have private mortgage insurance (PMI) on a conventional mortgage, removing it may reduce your monthly housing cost without refinancing.
For many qualifying mortgages, federal law allows homeowners to request PMI cancellation when the principal balance is scheduled to reach 80 percent of the home's original value, provided applicable requirements are met. PMI generally must terminate automatically when the scheduled balance reaches 78 percent of the original value if the borrower is current.
Fannie Mae and Freddie Mac loans may also have additional PMI cancellation guidelines, including circumstances involving current property value. Contact your mortgage servicer to determine the rules that apply to your loan. FHA mortgage insurance follows different requirements.
Consider a Longer Loan Term Carefully
Refinancing your remaining mortgage balance into a longer loan term can reduce the required monthly principal and interest payment by spreading repayment over additional years.
The tradeoff is important. A longer term can increase your total interest expense and keep you in debt longer. Compare both the monthly savings and long-term borrowing cost before choosing this strategy.
Review Your Homeowners Insurance Costs
If your mortgage includes an escrow account, rising homeowners insurance premiums can increase your total monthly payment even when you have a fixed-rate mortgage.
Florida homeowners may want to periodically review their coverage, deductibles, available discounts, and competing insurance quotes. Wind mitigation features may qualify for applicable premium credits depending on the property and insurer.
Do not reduce coverage simply to lower the payment without understanding the financial risk and any insurance requirements imposed by your mortgage lender.
Review Your Property Tax Assessment
Property taxes can also affect an escrowed mortgage payment. If you believe your Florida property's assessed value is incorrect, review the information provided by your county property appraiser and the procedures and deadlines for challenging an assessment.
Florida homeowners should also confirm whether they qualify for homestead exemption and other property tax benefits. Eligibility depends on the homeowner and property, and these benefits do not automatically apply to every residence.
What if You Are Struggling to Make Your Mortgage Payment?
If your payment is becoming unaffordable, contact your mortgage servicer as early as possible. Depending on your circumstances and loan, options may include refinancing, a loan modification, repayment plan, or forbearance.
A HUD-approved housing counseling agency can also help homeowners understand available options. Be cautious of companies that demand upfront fees or guarantee that they can modify your mortgage or prevent foreclosure.
The Bottom Line
The best way to lower a mortgage payment depends on why the payment is high. Refinancing may reduce principal and interest, PMI cancellation can eliminate an eligible insurance expense, and reviewing property taxes or homeowners insurance may help address rising escrow costs.
Loan Wolf Lending can help Florida homeowners compare refinance options and determine whether replacing an existing mortgage could support their financial goals. Call 754-755-3075 to discuss your options.
Please note: Refinancing may result in higher finance charges over the life of the loan. Mortgage terms, costs, and qualification requirements vary by borrower and loan program.