How to Lower Your Monthly Mortgage Payment When Interest Rates Are High
Tabitha LeJeune September 28, 2026
Tabitha LeJeune September 28, 2026
Higher mortgage rates can make buying a home feel more expensive, but your interest rate is only one part of the equation.
If you're thinking about buying a home in Austin, there are several strategies that can potentially lower your monthly payment or make the overall cost of buying a home more manageable.
Here are some options to discuss with your lender and real estate agent.
One way to lower your monthly payment is to reduce your mortgage interest rate.
This can be done by paying discount points upfront, which means paying an additional cost at closing in exchange for a lower interest rate. One discount point generally costs 1% of your loan amount. So, on a $400,000 mortgage, one point would cost $4,000. On a $500,000 mortgage, one point would cost $5,000.
The important thing to understand is that one point does not equal a specific reduction in your interest rate. The actual rate reduction depends on the lender, loan type and current market conditions.
Another option is negotiating for the seller to contribute toward a rate buydown as part of the purchase. In the right situation, a seller may be willing to provide a credit that can be used toward certain closing costs or a rate buydown.
This is one reason it's important to look at the entire offer. A seller credit toward a rate buydown could potentially have a greater impact on your monthly payment than simply negotiating the purchase price down by the same dollar amount.
Before paying points, ask your lender to calculate your break-even point. If you pay $4,000 upfront and save $100 per month, for example, it would take approximately 40 months to recover that upfront cost through the monthly savings.
If you plan to move or refinance before reaching the break-even point, paying points may not make sense.
A temporary 2-1 buydown can reduce your interest rate during the first two years of your mortgage.
Generally, the interest rate is reduced by 2 percentage points during the first year and 1 percentage point during the second year before returning to the original note rate.
This can give buyers a lower payment during the first few years of homeownership. However, it's important to understand that the payment will increase once the temporary buydown period ends.
The cost of a 2-1 buydown is different for every loan because it is based on the amount of the loan and the difference between the regular payment and the reduced payment during those first two years.
Think of a 2-1 buydown as prepaying the interest savings for the first two years. You get lower payments upfront, while the money needed to cover the difference is set aside at closing. The seller may be willing to pay this cost as part of the negotiation.
An adjustable-rate mortgage, or ARM, is different from a temporary 2-1 buydown, although both can result in a lower initial monthly payment.
With a 2-1 buydown, your actual mortgage rate remains fixed for the life of the loan, but your payments are temporarily reduced for the first two years. With an ARM, the mortgage itself starts with a lower interest rate for a set period, such as five, seven or 10 years. After that initial period, the interest rate can adjust based on the terms of the loan.
For example, a 5/1 ARM generally has a fixed interest rate for the first five years, after which the rate can adjust annually. The exact terms vary by loan.
An ARM can make sense for some buyers, particularly those who don't expect to keep the mortgage for a long period of time. However, it's important to understand how much your rate and payment could increase once the initial fixed period ends.
If you're considering an ARM, ask your lender about:
Don't assume every lender will offer you the same deal.
Interest rates, lender fees, closing costs and available loan programs can vary between lenders. Getting multiple quotes can help you compare the actual cost of each loan.
When comparing lenders, look at more than just the advertised interest rate. Consider:
A slightly lower interest rate doesn't necessarily mean the loan will cost less overall if the associated fees are significantly higher.
A larger down payment means borrowing less money, which can reduce your monthly principal and interest payment.
It may also help reduce or eliminate mortgage insurance depending on the type of loan and the amount you put down.
However, putting more money down isn't automatically the best option.
You also need to consider how much cash you'll have left after closing. Homeownership comes with moving expenses, maintenance, repairs and other unexpected costs.
The goal is to find a down payment that works with your overall financial situation, not simply to put down as much as possible.
The purchase price directly affects the amount you need to borrow.
A lower purchase price can mean a smaller loan and a lower monthly principal and interest payment.
However, it's also worth considering what you negotiate beyond the purchase price.
For example, you could compare the monthly savings from negotiating a lower purchase price with the potential savings from using a seller credit toward a rate buydown.
This is where having a clear negotiation strategy can make a difference.
Your mortgage payment isn't just principal and interest.
Your total monthly housing expense can also include:
This is especially important when comparing homes around Austin.
Two homes with similar purchase prices can have different monthly payments because of differences in property taxes, insurance or HOA fees.
When you're determining your budget, look at the estimated total monthly payment rather than focusing only on the purchase price.
Depending on your circumstances, you may qualify for different types of financing.
Conventional, FHA and VA loans can have different requirements, down payment options, mortgage insurance rules and interest rates.
Some buyers may also qualify for local or state assistance programs.
There isn't one loan program that works for every buyer, so ask your lender to compare the options available to you and explain how each one would affect your upfront costs and monthly payment.