Refinance Options to Lower Monthly Payments
If your mortgage payment feels too high, refinancing could help bring it down. After helping thousands of homeowners refinance over the past 17 years, I have used all four of these strategies with borrowers nationwide. The right one depends on your goals and financial situation.
Option 1: Rate-and-Term Refinance
This is the most straightforward approach. You replace your current mortgage with a new one at a lower interest rate, a longer term, or both. If rates have dropped since you got your loan, even a modest rate improvement can lower your payment.
You can also extend your loan term. Switching from whatever time you have left to a new 30-year loan spreads the payments over a longer period. The monthly cost goes down, but you pay more in total interest.
Option 2: Refinance to a Lower Rate
If rates have come down since you closed, or your credit profile has improved, a straightforward rate-and-term refinance can lower your payment without stretching your loan back out. Same term, lower rate, lower payment. The math has to clear your closing costs — that is what a break-even calculation is for.
Option 3: VA IRRRL
Veterans and service members with VA loans can use the Interest Rate Reduction Refinance Loan. It simplifies the process — typically no appraisal and less paperwork. If you can lower your rate, your payment goes down.
Option 4: Remove PMI Through Refinancing
If you are paying private mortgage insurance and your home has gained enough value, refinancing into a conventional loan without PMI can reduce your total monthly housing cost. The PMI portion of your payment disappears entirely.
What Will NOT Lower Your Payment
A shorter loan term. Going from 30 years to 15 years will likely increase your payment, even if the rate is lower. You save on total interest, but the monthly cost is higher.
Cash-out refinance. Taking cash out increases your loan balance, which usually means a higher payment. You might lower the rate, but the bigger balance offsets the savings.
How to Find Out Your Options
Every situation is different. The best way to know what could work for you is to check your rate at Lendtrain. It takes 30 seconds and shows you what your new payment could look like.
Rate quotes are estimates based on the credit score you enter. Actual rates may differ based on verified credit, income, and property details. Lendtrain (NMLS# 1844873) is a licensed mortgage broker. Equal Housing Opportunity.