Saving Without Refinancing
Instead of refinancing, consider applying an extra payment to the principal each year. You could save thousands in interest and shorten the term of your loan.
Refinancing your mortgage can save you money, but paying one extra mortgage payment every year can, too. By applying the extra payment to principal, the balance of your mortgage drops and future interest is calculated on the lower amount – every month for the remainder of your loan.
Say you have a 30-year, 3%, fixed rate mortgage of $200,000. Your payment is approximately $843 a month. If you make one extra payment every year, you could save more than $14,000 in interest and reduce the term of your mortgage by nearly four years.
If you can’t come up with an extra payment all at once, remember you can also make additional principal payments – of whatever amount you can afford – whenever you like.