Save Money Every Month by Refinancing Your Mortgage

refinance your mortgage

The unfortunate truth is that many people today are living on a tight budget. If you are included in this group, it may seem like every dollar you earn is earmarked for an expense before it even hits your bank account. Finding a way to save money is crucial, and there are many ways to accomplish this. However, not every option may be as effective as others. The fact is that if you have a home mortgage that you obtained more than a few years ago, refinancing your home mortgage may be one of the best steps that you can take today.

A Large Expense

If you are like most homeowners, your mortgage expense may be one of the largest expenses that you are responsible for each month.

However, most people do not consider trying to reduce this expense because of the perception that refinancing a mortgage may be difficult to do and may not yield significant results.

In reality, however, because this is such a large expense in your budget and because interest rates have decreased significantly over the last few years, you may be able to reduce your mortgage payment by a considerable amount when you refinance your loan.

Long-Term Savings

If you apply for a lower mortgage rate today, you will enjoy savings for a lengthy period of time.

The on-going savings associated with a variable rate mortgage can be difficult to depend on, but even these mortgages may offer savings for several months or years.

If you choose a fixed rate mortgage, you will enjoy savings on your budget until the loan is paid off.

The Alternatives

There are other steps that you can take to reduce your expenses.

For example, you could take a brown bag lunch to work, or you could find a few co-workers to carpool with.

You may decide to stop going out and enjoying life on the weekends, and you may skip a trip to the mall and wear older clothes to save money.

The fact is that these and other similar efforts all will require regular effort on your part.

For example, every single day, you will need to make the conscious decision to pack a lunch. It is easy to slip up and revert to old ways when you have to make a regular effort.

When you refinance your mortgage, however, the new, low mortgage payment will be established with your fixed expenses. This means that you can enjoy regular savings each month without making the regular, daily effort to do so.

As you can see, there are many benefits associated with refinancing your mortgage.

Refinancing a mortgage may not be quite as simple as deciding to take a brown bag lunch to work one morning, but the effort you make to compare mortgage rates and apply for a mortgage today may ultimately provide you with considerable benefits for many years to come.

You can explore the current interest rates available at Use an online mortgage calculator to estimate your monthly payments.

This can help you to better determine if refinancing your mortgage is a sound financial move to make.


    • DC @ Young Adult Money

      DC @ Young Adult Money 02/21/2013 4:52 a.m. #

      We just bought a house less than 6 months ago, so I don't think we will be refinancing anytime soon :) I do know a number of people who have either recently gone through with refinancing or have seriously considered the option.

      • Sicorra

        Sicorra 02/21/2013 10:51 a.m. #

        Having just purchased your home I'm sure you already have one of the lowest rates available, right?

    • KK @ Student Debt Survivor

      KK @ Student Debt Survivor 02/21/2013 7:13 a.m. #

      We haven't refinanced (our rate is really low), but we do try to pay extra payments. Ideally, someday we'll try to start paying the same as a 15 year mortgage.

      • Sicorra

        Sicorra 02/21/2013 11:23 a.m. #

        It is great that you are able to make extra payments. Is that regulated as to how much you are allowed per year? It is here in Canada.

    • Thrifty Dad

      Thrifty Dad 02/21/2013 8:38 a.m. #

      It's so true. Sometimes we get tied up in all the little things that we forget about the big things that can really save you big money.

      When interest rates took a dive a few years ago, we tried refinancing, only to find that the big Canadian banks got smart and now slap on a new prepayment charge to deter people from getting out early called the "interest rate differential" which would have been quite expensive. Although, it all depends on the size of your mortgage, how many years you have left on your term and the difference in interest rates.

      Having said that, it's definitely worth talking to a mortgage advisor about. As you said, it takes minimal effort and one small call could save you thousands.

      • Sicorra

        Sicorra 02/21/2013 10:55 a.m. #

        Yes the early payout penalty has always been there. In the past I always locked in my interest rate on a 5 year term with the fear that interest rates would rise. But inevitably they would drop. One time I was successful at refinancing and even after paying out the penalty we were ahead financially.

    • Money Beagle

      Money Beagle 02/21/2013 9:20 a.m. #

      In some cases, you have to look beyond the 'savings' because re-financing can actually cost you more from a cash flow perspective, but the 'savings' comes via your increase in net worth. If you re-fi down from a 30 to a 15 year mortgage, your payment could go up $100 per month, but your amount applied toward principle goes up $400, so while you have $100 less in cash a month, you're growing your net worth by a $300 differential from what you were paying prior to the re-fi, an amount that goes directly toward increasing your net worth.

      • Sicorra

        Sicorra 02/21/2013 10:58 a.m. #

        That is a really important point and a good reason to consider it.

        I guess there are two kinds of people, those that do it to save money and do not consider shortening their mortgage to 15 years, in fact many extend it for as long as possible, and then those that do it to increase their payments towards the principle amount, as you said, to have more equity in their house.

    • Pauline

      Pauline 02/21/2013 10:17 a.m. #

      I check about twice a year for a better rate, so far I am down from 2.94% to 2.29%. Over the long term it is a lot of money, and I'd rather refinance than make my own shampoo!

      • Sicorra

        Sicorra 02/21/2013 11:04 a.m. #

        That is incredibly low Pauline! 20 years ago this month I bought my first house at a mortgage rate of 8.15% and at the time we thought that was good.

    • krantcents

      krantcents 02/21/2013 10:21 a.m. #

      I have the dilemma of a very small mortgage that no one wants to refinance. My solution is to make additional principal payments to pay it off in less than 5 years. It has the same effect as a lower interest rate without additional expenses.

      • Sicorra

        Sicorra 02/21/2013 11:06 a.m. #

        Must feel good to be close to having it paid off.

    • Shannon @ The Heavy Purse

      Shannon @ The Heavy Purse 02/21/2013 11:10 a.m. #

      Absolutely agree, Sicorra. If you have a mortgage, a refi may help you out tremendously. Particularly if you've had the mortgage for awhile, when interest rates were significantly higher. We definitely keep an eye on rates to make sure we're getting the best deal. I've seen people significantly reduce their payments, which was a huge relief and helped them eliminate debt more quickly. Great post!

      • Sicorra

        Sicorra 02/21/2013 11:26 a.m. #

        Yes, anyone with a rate of 5% or higher should consider refinancing to free up their cash flow for other things.

    • Debt RoundUp

      Debt RoundUp 02/21/2013 11:15 a.m. #

      I am on the fence with refinancing. We want to move and don't have enough equity in the home to keep the costs low. We could refinance with a no cost, but that would add to the end, pushing out of the acceptable selling price range. If we did a traditional refinance, then we would pay closing costs, taking money from our down payment fund and not realizing the break even point for about 3 years. I don't think it is worth it.

      • Sicorra

        Sicorra 02/21/2013 11:27 a.m. #

        That is definitely a lot to consider Grayson!

    • Marissa @thirtysixmonths

      Marissa @thirtysixmonths 02/21/2013 4:44 p.m. #

      The regulations in Canada is a bit of a pain, but I like the 10% extra payments every year is a handy tool to pay down your mortgage faster.

    • Chris @

      Chris @ 02/21/2013 7:33 p.m. #

      Refinancing a 30 year mortgage at a lower interest rate can lower the monthly payment but no one in the comments mentioned the break even point from the closing costs which average $3,500. It's not just about freeing up cash flow. The extra money saved per month is offset by the time it takes to recoup the refinance costs. If it takes 4 years to break even and you might be moving soon then it won't make sense to refinance.

    • Justin@TheFrugalPath

      Justin@TheFrugalPath 02/21/2013 8:41 p.m. #

      We're currently in Grayson's predicament. We owe more on our house than what it's worth and currently have credit card debt. I'd love to re-finance, but it's going to have to wait a little bit longer. Which is sad because we could save a nice chunk of change.

    • Jenny @ Frugal Guru Guide

      Jenny @ Frugal Guru Guide 04/16/2013 2:19 p.m. #

      You may be paying more in interest than if you didn't refinance, so if you only look at your monthly payment, you could actually be INCREASING your real debt. (Just wrote a post on this--yesterday, I think!)

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