**”Refinancing Your Home Mortgage: My Experience Within the First Year”**
When you buy a new home, one of the first things you think about is refinancing if mortgage rates drop. How soon can you refinance to lower your monthly payments? If you’re like me, always looking for ways to save money and reach financial freedom, the answer is: as soon as it makes financial sense!
We moved less than a year ago and have already refinanced our mortgage, saving almost $70 a month. The best part? It cost us nothing out of pocket and will pay for itself within two years.
Should you refinance your mortgage soon after moving into a new house? Let’s break down the steps I took to decide, and see if it makes sense for you too.
I’m always looking for ways to cut household expenses. For example, we dropped our cell phone insurance with Sprint when I realized we could buy a new smartphone for the price they were charging us. No expense is safe, and I’m always on the lookout for new opportunities.
Recently, I noticed ads for mortgage rates significantly lower than ours. We had a 30-year fixed rate of 4.25%, but the going rate was now 3.75%. A 0.5% difference might not seem like much, but I decided to crunch the numbers.
Using estimates from various lenders, I calculated that even with a modest 0.5% rate drop, switching from one 30-year mortgage to another would lower our monthly payment by $69 and save us $23,318 in interest over the life of the loan. It made sense to proceed.
Closing costs can vary greatly, but I found an easy solution: use our current mortgage provider. They worked with us on closing costs, which came out to $1,645. Given our monthly savings, we’d break even on this expense within two years.
Initially, I wanted to go all in and get a 15-year refinance, which would have saved us almost $115,000 in interest. However, it would have increased our monthly payment by $408, which we couldn’t adjust to with our aggressive early retirement saving habits. Aligning finances with personal goals is crucial, so we stuck with the 30-year mortgage. Plus, long-term investments might yield more than 3.75%, making it more sensible to invest the money rather than pay off the house early.
Remember, you can always create your own 15-year mortgage by making early principal payments periodically. Even small extra payments can significantly reduce your loan term.
In less than a year, we refinanced our mortgage for a 0.5% lower rate, saving us money every month. The closing costs will pay for themselves within two years, and we’ll save a lot over the life of the mortgage. The key lesson: always challenge your bills. There are always opportunities to lower them if you look for them.
Earlier this year, I challenged our property taxes and got them significantly lowered. There are many ways to cut monthly expenses, from a few extra bucks to a few thousand. If you want more tips, check out my ebook “Save MORE, Earn MORE!” Once you start auditing your expenses and redirecting those savings towards your financial goals, you’ll appreciate the effort.
How many of you have wondered how soon you can refinance your home? How quickly did you act, and how much did you save? What other steps have you taken to reduce your monthly expenses?
