5 Proven Ways to Lower Mortgage Payment

Do you how to get a lower mortgage payment without refinancing? Discover the best ways to ways to lower your monthly mortgage payment today.

1. Try to Put Down a Larger Down Payment

Before the subprime mortgage crisis (way back in 2008), it was possible to get away with a mortgage loan with as little as 3 to 5% down payment. But even back then, we were already advising our readers to save up for a minimum of 20% down payment.

In today's market where lenders are more wary of unqualified borrowers, this advice rings even more true. Studies have shown that borrowers who put down at least 20% down payment are less likely to default on their mortgage loans (Source: New York Times) and the lenders know that.

A larger down payment will reduce your mortgage payment in three ways.

First, more lenders will be willing to offer you a mortgage loan - With more lenders to choose from, you're bound to find one with lower interest rates and better terms. If your down payment is less than 10%, you will have a hard time finding someone to approve your loan, much less having a choice.

The more down payment you put upfront, the less you borrow... and the less interest you pay. For example: If you put down an additional $20,000, you will be borrowing $20,000 less... and avoiding any interest on that $20,000.

By putting down a larger down payment, you can avoid paying for private mortgage insurance (see below)

2. Don't Pay for Private Mortgage Insurance

If your down payment is less than 20% of the sale price, then your lender will require you to pay for private mortgage insurance or PMI. This insurance protects your lender from any losses in case you default on your mortgage payments.

Depending on the total mortgage amount and your down payment percent, PMI will typically cost you 0.5 to 1% of the original loan amount each year. Avoiding or eliminating PMI is one of the best ways to reduce monthly mortgage payments.

If you're already paying for PMI, then keep track of the amount of principal you have repaid. Once you have 20% equity on the property, then you can contact your lender to cancel your PMI payments.

To save time and effort, you can ask your lender directly how long it will take for you to reach this 20% equity level (they're required by federal law to disclose this information to you).

3. Check and Brush Up Your Credit Scores

Whenever lenders grant you a mortgage loan, they take a risk betting that you will pay your mortgage payments on time every month. If you can convince them that you are a safe choice who is unlikely to default on your loans, then they will definitely be happy to lower your mortgage payments.

Your credit report is one of the most important things to help lenders decide if you are a low or high risk borrower. So in other words, an excellent credit score is a sure way to lower mortgage payments.

You can obtain your credit report from Equifax, Experian or TransUnion. FICO credit scores range 300 to 850. A score of above 745 indicates good credit. However if your credit score dips below 620, then it's considered as having poor credit and it will affect your chances of securing lower mortgage payments.

Before applying for a mortgage, don't close any old credit accounts even if you are not using them. Doing so will lower your credit score because it shortens the length of your reported credit history.

Always pay your bills on time. Avoid any avoid late or non-payment of any bills because your credit score can take beating even for a single overdue bill. To avoid late payments, it's best to set your bills on automatic deduction from your bank accounts.

Before your mortgage is finalized, avoid opening new credit accounts or taking on other debts. Doing so will increase the number of companies running a credit check on you and your credit scores will take a hit as well.

NEXT: More Ways on How to Lower Mortgage Payments