This is the best way to lower your monthly mortgage payment

Inevitably at the end of the year and after a spendy holiday season, the collective American consciousness turns to save money.

Many consumers focus on micro-adjustments in order to put more cash back in the monthly household budget: skipping the latte, cutting subscription services and planning more meals at home. While these smart moves do save money, it is actually macro adjustments that make the most substantial difference.

One big way to save is by lowering your biggest expenses – particularly monthly mortgage payments. There's one thing you can do right now and notice fast results. Here's what you need to know.

How can I lower my monthly mortgage payment?

Due to the effect of the coronavirus pandemic on the U.S. economy, interest rates are still at record lows. This means homeowners who refinance in the next few months can shave hundreds off their monthly payment and effortlessly put more money back into their pocket each month, no couponing required.

For novice refinancers, there are many online mortgage calculators that can quickly illustrate the real figures of how much money you could be leaving on the table by not refinancing.

For example, say you bought a home in 2016 and want to refinance $300,000 to another 30-year fixed-rate mortgage. The mortgage rate you received in 2016 was pretty good at 3.75% but now you qualify for 2.75%. This difference of just 1 percent saves $263 on the loan each month and close to $15,000 on the life of the mortgage.

It’s important to include any closing costs in your calculations, as this will impact when the new loan "breaks even" and the true savings can begin. The calculator we recommend here factors in these closing costs so consumers can weigh the true cost-benefit when evaluating mortgage options.

WHY IT'S A GOOD IDEA TO REFINANCE YOUR MORTGAGE WHILE RATES ARE LOW

What about the adverse market fee?

To recap: in December 2020, in response to the refinance spike, the Federal Housing Finance Agency began adding a .5% "adverse market fee" to all convention refinance loans over $125,000 sold to Fannie Mae and Freddie Mac. As the largest buyers on the secondary mortgage market, over 70% of mortgages are sold to Fannie Mae and Freddie Mac each year, which means every homebuyer should look out for this fee, even if you’re unsure of what will happen once you close on the mortgage loan.

"Is it a good time to refinance anyway? Yes. Mortgage rates are very low right now, even with the adverse market fee built-in," advises Casey Fleming, Mortgage Advisor from Silicon Valley, CA, and author of "The Loan Guide: How to Get the Best Possible Mortgage." "If you can save money, don't let the adverse market fee stop you from doing so."

WHO'S EXEMPT FROM THE NEW MORTGAGE REFINANCE FEE?

Other ways to lower your mortgage payment

If refinancing isn’t the best option for you currently, there are a handful of other ways to lower your monthly mortgage payment:

• Rent out rooms in your home to long-term tenants.
• Consider listing the home on Airbnb.
• Sell your current home. Moving in the next few months would qualify you for a new mortgage at record low-interest rates.
• When buying a new home, put more money down to lower the amount you pay each month.
• Consolidate debt to a lower interest personal loan. With the extra savings each month you can put extra toward your mortgage, or to bulk up those emergency savings.

See what kind of personal loan rates you qualify for today to see if it makes sense for you.

EVERYTHING YOU NEED TO KNOW ABOUT PERSONAL LOANS