How to Lower Your Mortgage Payments - 17 Smart Ways to Spend Less (2024)

Owning a house will be easily one of the biggest purchases of your life.

But your mortgage payments don’t have to stay huge for the rest of your life.

When the opportunity strikes, you can easily shave hundreds of dollars off your monthly payments.

This could translate into few years and thousands of dollars saved over the lifetime of your loan.

Here are 17 clever ways you can lower your mortgage payments and save more money.

1. Don’t live in a high status area.

The house I live in would easily cost double if I lived in the next county over. But since I don’t, I get the enjoyment of living like a king at half the price. Be smart about where you live and don’t always buy into the hype of living in one particular area or another.

2. Live in a smaller house.

A big house seems like a good idea at first. But speaking from experience, all that comes with it is more work! There’s more to clean, more yard to mow, and more things that will break and need your money to repair them. Do yourself a favor and get just as much house as you need.

3. Avoid home-owners associations.

Avoid buying a home in places with high home-owner association fees. Take it from me – they will just make you frustrated!

4. Low-ball your first offer.

When you finally step up to the plate and go to make an offer on a house, be sure to low ball it. The sellers will always come back with a higher counter-offer, so going in low will set the bar right where you want it to be.

5. Always pay your mortgage payment on time.

It probably goes without saying: Don’t pay any more for your mortgage than you truly have to just because your payments are late. Avoid this altogether by signing up for automatic payments, either directly with your mortgage provider or through a free bill pay service with your bank.

6. Skip PMI.

In order to bypass having to purchase private mortgage insurance (PMI), bring at least 20% to the table, no matter if this is your first home purchase or a refinance. Otherwise it will just be another ~$100 or so that gets tacked on to your monthly bill.

7. Send in extra money.

If at all possible, send in a little extra money each month with your mortgage payment to put towards the principal. Even something as small as $50 to $100 per month can shave years off your schedule and tens of thousands of dollars off your interest. Play around with this sweet mortgage calculator on Bankrate and you’ll see what I mean!

8. Keep your eyes on the rates.

Stay in tune with the current mortgage rates and watch to see if they drop. Even as much as 0.5 percent lower could make sense to refinance.

9. Switch to a lower term.

Speaking of refinancing, if you’re considering doing it, then look into taking a lower payment term too. For example: Switching to a 15 year mortgage instead of a 30 year. Again, you’ll save a boat-load on the interest – possibly 5 or 6 figures worth!

10. Shop around and compare loans.

Not all lenders offer the same apples-to-apples prices, so you really need to get a complete perspective of the whole out of pocket cost.

11. Know your comps.

Before you refinance, be certain that the equity value of your home will meet the 25% threshold. Research your taxes and comps in the area before paying $400 for an estimate.

12. Don’t give out your Social Security number.

Never give out your Social Security number to get a budgetary price for a new loan. No one but you needs to know that until its time to do the real deal. While shopping around, just ask for ballpark figures.

13. Consider buying points.

If it works to your advantage, buy points up front to get a lower interest rate and save money on your interest over the long haul.

14. Get a tax deduction for your points.

Don’t forget: Just like your mortgage insurance, purchasing mortgage points is tax-deductible too.

15. Setup your own high-interest escrow.

If you’re not required to have an escrow account, then great! Setup your own version of one using a high-interest online savings account where you can park a year’s worth of principal and interest payments as well as the annual taxes and home-owners insurance premiums.

16. Skip the escrow.

Does your mortgage provider charge you if you opt NOT to setup an escrow? If they do, then forget the savings and set one up with your mortgage provider like they want you to. The interest likely won’t be worth the fee.

17. Keep your property taxes under control.

When you get your property tax papers in the mail, look them over to see how much they’ve increased. If they start to get unreasonably high, then file a dispute to have them adjusted. You can do this easily by researching various comps in the area and making a case. We did this and got our tax bill lowered by almost $1,000 for the year!

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