Can I Lower My Mortgage Payment?

by Chris Joseph, Demand Media

    If you're like a lot of people, your home may be your most valuable asset. Unfortunately, it can also be your greatest expense. If your monthly mortgage payment is starting to feel like a hangman's noose around your neck, there are some ways you can avoid swinging from the home mortgage gallows.

    Refinance

    If you're having trouble making the payments each month on your fixed-rate mortgage or you have an adjustable-rate mortgage, or ARM — a mortgage in which the interest rate, and your monthly payment, is about to make a significant jump — consider refinancing to a lower interest rate. This can reduce your payments as well as the amount of interest you'll pay over the term of your mortgage. Just as when you bought your home, you'll need good credit to refinance.

    Say Goodbye to PMI

    If you made a down payment of less than 20 percent of your home's price when you took out your initial mortgage, your lender probably required you to carry private mortgage insurance to protect it against your possible default. The good news is that if you have paid on your mortgage to the point at which the balance is 78 percent or less of the home's original value, your lender must lift the PMI requirement, resulting in a lower monthly payment.

    Extend the Term

    You can also stretch your payments out over a longer term to lower the monthly payments. For instance, if you took out a 15-year fixed-rate loan for $100,000 at 6.25 percent interest, you can cut your monthly payment from $857.42 to $730.93 by refinancing to a 20-year loan at the same rate. The downside is that you'll also end up paying more than $21,000 in total interest, and it will be an additional five years until you own the home free and clear.

    Try to Modify

    If it's gotten to the point where you've fallen behind on your payments, you may be able to modify your loan if you meet the criteria specified by the Making Home Affordable Modification Program (HAMP). Qualifications include the following: Your home must be your primary residence, you must owe less than $729,750 on your first mortgage, the home has to have been purchased prior to Jan. 1, 2009, and your mortgage payment and related expenses must be at least 31 percent of your gross income. The cause of falling behind must be due to a financial hardship like a job loss.

    About the Author

    Chris Joseph writes for newspapers and online publications, covering business, technology, health, fitness and sports. He holds a Bachelor of Science in marketing from York College of Pennsylvania.