With rates at record lows, it may be time to refinance your mortgage – even if you recently closed on a new mortgage or just refinanced. I bought my house in 2012 when I thought rates “couldn’t get any lower”, little did I know a pandemic would hit the world and rates would fall off a cliff.

Though a local credit union I’m able to lock in a 15 year fixed rate of 2.65%, saving over 1% from my current 3.875% fixed rate.

	Old Mortgage	New Mortgage	Difference
Principal Balance	$136,993.05	$131,000	$5,993.05
Interest (fixed)	3.875%	2.65%	-1.225%
Payment Breakdown 1 month for comparison	$448.85 (p) $442.37 (i) $891.22 (t)	$593.48 (p) $289.29 (i) $882.77 (t)	$144.63 (p) -$153.08 (i) -$8.45 (t)
Remaining Years	18	15	-3

This means:

• The cost of refinancing ($455) is paid for in about 3 months of the new mortgage in interest savings
• The monthly payment is a little less than I’m paying now
• I’ll save about $25,000 in interest over the 18 years left on my original mortgage if I didn’t refinance

What’s the catch?

I need to put about $6,000 in extra principal during the refinancing process to make these numbers work. But…

• It reduces the interest expense by about $1,275 between now and year-end with the new loan
• There’s no risk to my emergency fund by taking out the extra cash

For me, the pros outweigh the only con of dropping $6k in principal. And technically that just further reduces the debt and is not an actual “expense” on the financial statement.