7 Ways to Save Money on Your Mortgage

Quick Answer

You can save money on your mortgage by shopping around, negotiating your rate, making biweekly payments, refinancing and ending PMI early.

A couple planning their mortgage payments.

Experian, TransUnion and Equifax now offer all U.S. consumers free weekly credit reports through AnnualCreditReport.com.

Buying a home is an expensive proposition, perhaps the largest purchase you'll ever make. Given the scale of a mortgage balance, your mortgage payment is likely your largest monthly bill. Even a slight difference in interest rate or payments can morph into major savings (or spending) over time.

The average monthly mortgage payment in the U.S. is $2,020, according to Experian data from April 2024. That's up 7.9% from April 2023, when the average mortgage payment was $1,871.

Here are seven ways to save money on your mortgage, whether you're about to start applying for one or want to reduce costs of an existing mortgage loan.

1. Shop Around for a Mortgage

If you plan to buy a home but haven't yet started the process, take the time to shop around for the best mortgage rate. You can apply with a lender you already use for loans or banking, but doing some cost comparisons now can translate into savings for years to come.

While lenders base their mortgage rates on federal rates, they have discretion to set rates and some fees. Plus, their products can vary. Collect quotes from at least a few mortgage lenders to make sure you land the best rate and terms possible. Be sure to compare loans with the same amount and loan term.

Mortgage Calculator

The information provided is for educational purposes only and should not be construed as financial advice. Experian cannot guarantee the accuracy of the results provided. Your lender may charge other fees which have not been factored in this calculation. These results, based on the information provided by you, represent an estimate and you should consult your own financial advisor regarding your particular needs.

2. Negotiate Your Rate

Some mortgage lenders offer terms on a take-it-or-leave-it basis. Others may be willing to negotiate on certain terms to entice potential borrowers.

If the mortgage rate you receive seems high, you can try to negotiate it down to a lower interest rate. There's no guarantee, but success is more likely if you have excellent credit, or if you have loan estimates from other lenders and ask them to match or beat it.

You can also try to negotiate the origination fee, which can be as much as 1% of the purchase price, in addition to negotiating other closing costs.

3. Compare Adjustable- and Fixed-Rate Mortgages

When taking out a mortgage, you can choose between a fixed-rate and an adjustable-rate (ARM) loan. Fixed-rate mortgages are most common and have the same interest rate for the life of the loan, unless you refinance. This is ideal for those who need predictable payments.

ARMs begin with a fixed rate for a set number of years, during which time the rate tends to be lower than what you'd get with a fixed-rate mortgage. Then a variable-rate period begins, which may cause your rate to rise or fall based on market rates.

The most common ARM is 5/1, where the borrower pays a fixed interest rate for five years, followed by a variable rate that can adjust only once annually for the remainder of the mortgage term. If this isn't your forever home and you'll likely sell before the fixed-rate period ends, an ARM can save you money. That's because the initial rate is usually lower than you'll get with a fixed-rate mortgage—and ideally you'll move before the rate turns variable and potentially increases. It may also be doable for homebuyers who expect their incomes to rise, since a rate increase years down the road won't hit as hard.

If you're in either of those situations, ask your lender to compare ARMs with fixed-rate mortgages in case one is a better deal for you. ARMs can be more expensive in the long run—especially if rates rise—but can save you money if you don't plan to live in the house for many years. If you plan to stay put, you may be better off with a reliable fixed-rate mortgage that you can refinance later on if needed.

Learn More >> What Is an Adjustable-Rate Mortgage?

4. Make Biweekly Mortgage Payments

Mortgages require one monthly payment, though lenders usually welcome larger or additional payments. A little trick of the calendar can help you squeeze in extra payments without really feeling it.

Instead of making one full monthly payment, pay half your monthly mortgage amount every two weeks. The magic of this biweekly payment strategy lies in the calendar. There are 52 weeks in a year, and if you pay twice monthly, you'd make 24 payments annually. Paying every two weeks, on the other hand, allows for 26 total payments.

This biweekly method results in the equivalent of one extra monthly full payment each year. This could benefit you in two major ways:

  • Less interest accrues when you make more frequent payments since it brings down your principal balance faster.
  • More frequent payments will pay off your mortgage sooner, potentially wiping out several years of payments.

If you try this, just make sure the payment due dates sync your paycheck schedule so you don't accidentally overdraw your checking account and get hit with fees.

5. Make an Extra Payment Every Year

As noted above, contributing just a little more more to your loan payments can help you pay off your mortgage faster—and ultimately save you money on interest. You can go about this in a few different ways, including paying biweekly, discussed above.

  • Put cash windfalls toward your mortgage. One option is to funnel any cash windfalls toward your principal balance. This can include tax refunds, bonuses, raises, gift money or other "found" money you come into throughout the year.
  • Add a bit extra to each payment. Another approach is to divide your monthly mortgage payment by 12, then add this amount to every regular monthly bill. At the end of one year, you will have made an extra payment. It may not feel like much, but this annual additional payment adds up over the long run.

6. Refinance Your Mortgage

Refinancing your mortgage involves taking out a new loan to pay off your existing loan's outstanding balance. This can leave you with a new monthly payment that may be lower than what you were paying before.

Refinancing can also be an opportunity to change the terms of your loan or lock in a lower interest rate. Both ways could help you save a significant amount of money on your mortgage. Just be aware that changing your mortgage's term to a shorter one will increase payments. Plus, refinancing requires hefty closing costs, so make sure the savings justify the expense.

Learn more >> How Does Refinancing a Mortgage Work?

7. End PMI Early

When you put less than 20% down on a conventional mortgage loan, lenders typically require you to have private mortgage insurance (PMI) to protect them from default. It varies by lender, but it isn't unusual to pay $30 to $70 per month for every $100,000 borrowed, according to Freddie Mac.

Not every homebuyer can put down enough to avoid PMI at first, though you can end your PMI payment once you cross the 20% equity threshold. This can be done earlier if you accelerate your monthly payments to reach that threshold faster. If you purchased your home with an FHA loan, however, mortgage insurance won't automatically drop off and you'll have to refinance.

Another option for conventional loan borrowers is to arrange for a fresh home appraisal with your lender, which will likely cost you a few hundred dollars. If your property's value has gone up, you could drop your PMI sooner rather than later as your home value is used to determine your equity. You can also consider making one lump-sum payment that decreases your loan balance enough to get to the equity needed.

Improve Your Credit For Greater Savings

Whether you're gearing up to take out a mortgage or thinking about refinancing, maintaining good credit is key to securing a good rate.

To see where your credit currently stands, check your credit score and credit report from Experian for free. As you make efforts to improve your credit, like reducing debt balances and making on-time bill payments, your score will improve—and make it more likely you can qualify for money-saving mortgage or refinance terms.