How Refinancing Can Shorten Your Mortgage and

Save You Money

If you qualified for an attractive mortgage when you first bought your home, refinancing might be an idea that has generally passed you by. After all, refinancing a home mortgage changes the terms of the payments you might have been making for years, and that can seem confusing and unnecessary.

What you might not have realized is that, even if you are happy with the terms of your mortgage and your monthly payment, refinancing can still be hugely beneficial, either by shortening your loan duration, lowering your monthly payments, or doing both at the same time.

Take Advantage Of Changes In The Market

The housing market is almost constantly in flux, and changes in interest rates are notoriously hard to predict. The same mortgage rate that seemed attractively low one year can look unreasonably high the next. This depends entirely on the health of the market. Every time the current mortgage rate drops, you have an opportunity to save money by paying less interest. Even small changes can add up considerably over the lifetime of a loan. Today’s homeowners can save themselves an average of 30% by refinancing at a lower rate – a saving that can more than make up for a few additional years of interest if you refinance out to 30 years.

Shorten the Duration of Your Loan

Of course, refinancing out to 30 years isn’t only one option, and, while it might considerably lower your monthly payments, it might not be what saves you the most money overall. For example, if you have good credit and a stable financial situation, refinancing out to a shorter term, like 10 or 15 years, can lower your interest and shorten the overall duration of the loan. This can save you a considerable amount of additional money in the years after your loan is paid off.

Use Lower Payments to Pay Off Your Loan Sooner

If you do decide to refinance out to 30 years to give yourself lower monthly payments, you can still shorten the duration of your loan by continuing to make the same payments you were before. Say, with refinancing, you get your monthly payment lowered from $2,500 to $2,000. If you continue to pay $2,500 every month – something that is already in your budget – then you shorten the life of your loan by paying it off more quickly. This allows you to reap the benefits of both lower interest and a shorter loan – saving money on two fronts.

Get Your Lender to Pay Your Closing Costs

The most attractive potential part of refinancing a home mortgage is what is called a no-cost loan. With these kinds of loans, there are no closing costs associated. The lender may cover the closing costs in exchange for slightly higher interest. While the interest does add up over the lifetime of the loan, you can prevent it from becoming too much by taking advantage of the other strategies for saving money such as early repayment or a shorter mortgage term. Meanwhile, you have no out-of-pocket costs to worry about recouping with the savings from your lower interest rate.


With Herring Bank, you have a partner in the home buying process. Call us at (866) 236-4779 or request a call below to learn how we can help make your buying experience easier!

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