How to Save on Your Mortgage
If you’re like most homeowners, you’re always looking for ways to cut monthly expenses—streaming services, insurance plans, memberships, and more. But one of the biggest monthly bills you have, your mortgage, is often the last place people look for savings. The good news? With a little planning, there are several smart ways to reduce what you pay over time.
1. Make One Extra Mortgage Payment Each Year
Making a 13th payment annually can shorten your loan term by years and save thousands in interest. Simply divide your monthly payment by twelve and add that amount to each month—or save it and make one extra payment at year’s end. Be sure to tell your lender that the additional amount should be applied directly to the principal.
2. Eliminate PMI (Private Mortgage Insurance)
If your down payment was less than 20%, you’re likely paying PMI—an added monthly cost that protects the lender, not you. Once your loan balance drops below 80% of your home’s current value, you can request that your lender remove PMI. If your home’s value has increased, a new appraisal may qualify you sooner. Dropping PMI can save over $1,200 per year.
3. Consider a Mortgage Recast
If you receive a lump sum of money—like a bonus, inheritance, or tax refund—ask your lender if they offer a mortgage recast. A recast recalculates your monthly payment based on a lower principal balance, potentially reducing your payment without refinancing. You can still choose to pay your old amount each month to pay off your loan even faster.
4. Manage Your Own Escrow for Taxes and Insurance
Some homeowners choose to pay property taxes and insurance themselves rather than through an escrow account. By setting up your own savings account for these bills, you earn the interest instead of your lender. Just make sure your lender’s fees for removing escrow don’t outweigh the savings.
5. Refinance When Your Financial Situation Improves
If your credit score has increased, your income has grown, or interest rates have dropped since you bought your home, refinancing could lower your monthly payment significantly. Even a small rate reduction can save thousands over the life of your loan.
Your mortgage may be your largest monthly expense, but it doesn’t have to remain your biggest burden. With smart strategies like these, you can reduce costs now and long-term. Have additional money-saving ideas? Share your tips with us—we’d love to hear from you!
