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Unexpected Expenses? Refinance Your Mortgage to Reduce Your Payment

Does your income barely cover your monthly outlay?

If a salary increase seems unlikely, you could try reducing your expenses instead. Or, if you qualify, you might be able to refinance your mortgage and reduce your monthly payment. Either way, your financial situation will improve and for your efforts, you can begin to collect some extra cash for unexpected expenses, home repairs, or even supplement paying for your college student’s tuition.

There are two basic ways to reduce your monthly mortgage payment.

When considering ways to reduce a loan payment, most people begin by focusing on the interest rate. A reduction in the interest rate of a loan will inevitably reduce the required monthly payment. However, in the mortgage world, where there are closing costs to consider, the size of the interest rate reduction matters. A borrower must decide if it would be financially prudent to refinance.

Since the 2008-09 recession, mortgage rates have hovered at historic lows. But, take note; rates have begun to increase steadily. If rates continue to rise as indicators show, and you’re considering a refinance mortgage, now is the time to act!

The other primary way to reduce a monthly mortgage payment is to extend the term of the loan. This is a great way to reduce your current monthly payment, however, keep in mind that interest charges will continue for an additional umpteenth years.


For those borrowers who bought their home needing Private Mortgage Insurance (PMI) years ago, look into whether your home’s appreciated value is significant enough to cancel your PMI payment. This option, however, requires a good+ credit score. Contact us for instructions on how this is done.

Additionally, a PMI cancellation rule was established within the federal government’s Homeowners’ Protection Act. It is important to note that this legislation only applies to homeowners who purchased their homes any time after July 29, 1999.

Essentially this act denotes that the cancellation option of a PMI insurance payment, applies to people who bought their homes after July 29, 1999. The act does not require an appraisal, because the cancellation request is automatically granted if the borrower has paid down their mortgage balance to 80% of the original loan balance.

The Take-away

The reality is that reducing your interest rate will reduce your monthly payment, but there are other questions to ask like, will it drop the payment enough to pay the new closing costs? Will you be living in the property long enough to break-even? The breakeven point is a simple calculation that any mortgage professional can help you with.

If your objective is to reduce your monthly payments to generate cash enough to be prepared for specific life events (college or a wedding), or for those unexpected times when things go awry, you’re headed in the right direction. Contact us today to see if we can help you with your life goals.