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Oct 2023

6 Ways To Lower Your Monthly Mortgage Payment




How to lower your payment before you buy


How to lower your payment after you buy


“The Three R’s”: Refinance, recast, and rent




How to lower your payment before you buy


How to lower your payment after you buy


“The Three R’s”: Refinance, recast, and rent

Are you searching for ways to make a little more room in your budget? Lowering your monthly mortgage payment is an excellent place to start! From refinancing, to recasting, to renting out part of your home, you have several options for reducing your payment. The list goes on and on, but we’ve narrowed down six ways you can lower your monthly mortgage payment right now. Read about them below!  

1. Refinance To a Lower Interest Rate  

The simplest explanation of refinancing is you are financing your property again. You're repeating the mortgage process you completed when you originally bought your home, only instead of buying a new home, you’re just getting a new loan with a new rate and term. Consider refinancing to: 

  • Lower your monthly payment 

  • Consolidate existing debt 

  • Lower your interest rate 

  • Convert to a fixed-rate mortgageA home loan with an interest rate that will not change over the life of the loan.fixed-rate mortgageA home loan with an interest rate that will not change over the life of the loan. 

  • Pay off your balance faster 

  • Tap into the equity you’ve built in your home 

And at Atlantic Bay Mortgage Group®, we don’t want you to ever miss out on saving opportunities. Our team monitors your loan against current rates and conditions and notifies you when you can benefit from refinancing your home loan. We’ll walk you through the entire refinance process and keep you informed every step of the way.  

2. Recast Your Loan 

After closing your loan, lower your monthly mortgage payments by “recasting” and keep the same rate and term.

Only available to Conventional loans, start the recasting process by contacting your loan servicer for the necessary steps. Just know, recasting typically comes with a few fees.

Next, make a one-time lump sum payment toward your principal balance. Your loan servicer will then re-amortize the remaining loan balance, and your remaining payments are recalculated based on the new principal balance. Your new payment will go down by the amount you paid in the lump sum.

In addition to lowering the monthly payment, borrowers often recast their loans to invest, pay off debt, and save for big-time expenses.  

How Loan Recasting Works 

Let’s say you took out a loan for $250,000 at 4% for 30 years. Your monthly payment's principal and interest portion comes to $1,193.54.

Five years pass, and wouldn’t you know it, you win the lottery. You decide to use your earnings of $51,000 to pay down your mortgage balance, so now, you owe $175,000.

With a recast, you’ll keep your 4% rate and 30-year term, but your lender will divide the new $175,000 balance by the number of months left on your loan.

After all is said and done, you’re left with a lower monthly payment of $923.71!

Recasting is not the same as refinancing because you won’t need to fill out an application; you just request a re-amortization.   

3. Remove Private Mortgage Insurance  

Typically for Conventional loans, if you put less than 20% down, you must pay private mortgage insurance (PMI). Lenders require PMI to protect themselves against potential loss if a borrower stops making payments.

You may be thinking that there must be a way to avoid the responsibility of paying insurance premiums on something that, hopefully, your lender will never need. And you’re right, there is!

You can ask your service to cancel the PMI when your mortgage’s principal balance falls to 80% of the original value of your home. Helpful tip: You should see the scheduled date on the PMI disclosure form that came with your mortgage paperwork – ask your servicer if you need help.

You can also request PMI cancellation if you’ve made additional payments that have brought your principal balance to 80% of the original value.

Finally, PMI is automatically canceled at 78% even if you don’t request it. Remember that for these scenarios, your payments must be up to date, and you must make the request in writing. Again, your Mortgage Banker is always happy to assist you.

PMI rates usually range from 0.5 to 1% of the total loan amount annually, but let’s put that into perspective… 

Expert Tip

For a home that costs $230,000, you’d pay $1,150-$2,300 a year in PMI costs.

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 4. Extend Your Loan Term 

If a lower mortgage payment is the destination, extending your loan’s term can certainly help you get there. A longer mortgage term, say 30 years rather than 15 years, spreads your balance over more payments. Reach out to your lender to adjust your loan’s term.

And if you’re worried about the extra interest you’ll accrue by making the switch, you can always make additional payments down the road or refinance once your financial situation improves.  

5. Rent Out Part of Your Home 

If you have a spare bedroom or extra space currently collecting dust in your home, renting it out to a friend, family member, or trustworthy tenant is a great way to make a little extra cash and offset the cost of your mortgage payment. Way back when, this used to be known as “renting,” but since everything needs a catchy title these days, this action is known as “house-hacking.”

Speaking of “cutting-edge” home terminology, you may have heard the term “accidental landlord” pop up in the news recently. Accidental landlords are property owners who become managers, usually because of inheritance or other unexpected means. You might become an accidental landlord if a property becomes too expensive to sell. You can recoup some of your money by renting out the home.

Although similar, house-hacking is not the same as “accidental landlord-ing” because the former stems from a deliberate choice made by the homeowner. In other words, house-hacking doesn't just fall into your lap. It's a strategy you'll have to plan for, but it can help you cut down your mortgage payments if done right.    

6. Shop For Homeowners Insurance 

Because homeowners insurance is required for a mortgage, shopping around for a better rate isn’t a bad way to lower your monthly mortgage payment.

And may we suggest starting your investigation off by checking out AB Insurance? With access to more than 20 companies, AB Insurance offers products customized to fit your unique needs – or simply an excellent tool for comparing your current policy.   

Get your quote today! 


Use the tips above to get a start on lowering your monthly mortgage payment. If you have any questions, don’t hesitate to reach out! The entire Atlantic Bay team is always happy to lend a little peace of mind.