Calculating refinance savings

How Refinancing Your Mortgage Could Save You Money

Learn more about the benefits of refinancing your mortgage and how it can save you money.

Money doesn’t grow on trees, and most people work very hard for what they have. To help save money, many people use budgets, clip coupons, only buy new when things are on sale, and shop at thrift stores and flea markets. Money saved is money earned, right?

But there’s a way to potentially save a lot of money that is often overlooked – refinancing your mortgage when interest rates go down. Depending on the amount of the mortgage and the terms, the savings could be significant. Refinancing when mortgage interest rates drop one or two points could result in thousands of dollars in savings over the life of your loan.

It’s worth checking with your lender to see if you could save money by refinancing your mortgage.

How Are Mortgage Refinance Rates Determined?

Interest rates are constantly in motion, and to understand how refinancing can save you money, it’s worth taking a look at how rates are determined.

Interest is the money that is paid to a lender for the money you borrow. When you make your monthly payments on your mortgage, part of the payment goes towards repaying the principal of the loan while the rest goes towards the interest.

The amount you pay in interest for your loan is primarily determined by the current interest rate when you took out your mortgage. Mortgage refinance rates are largely influenced by Fannie Mae and Freddie Mac, which are large financial institutions that buy mortgages and then resell them to investors.

Additional factors that can influence your mortgage interest rate include:

  • Your credit score

  • Loan amount

  • The local housing market

  • The size of your down payment

  • Length of the loan

  • Whether you choose a loan with a fixed or adjustable-rate

How Does Refinancing Save You Money?

Refinancing an existing mortgage can save you money in one of three ways:

  • Lowering your monthly payments

  • Repaying your loan in less time

  • Reducing the total interest you will pay on the loan

When you apply to refinance your mortgage, be sure to mention your goal to your lender to make sure you get the best mortgage for your needs.

1. Lowering your monthly payments

When mortgage refinance rates go down, it may be possible to structure a new loan with lower monthly payments. The equity you have in your home and other factors will be important considerations in the length of the new loan. Even with a lower interest rate, you may have to go with a mortgage with a longer term to achieve your desired monthly payment.

2. Repaying your loan in less time

Reducing the time it takes to repay a loan can be accomplished by structuring a new loan with shorter terms, making additional payments on your new loan, or both.

If you have a 30-year mortgage, for example, you could refinance into a new 15 or 20-year mortgage to repay the remaining principal in less time. With this option, you may end up with higher monthly payments. It depends on a variety of factors like how much equity you have when you refinance, the new interest rate, and other things.

If you refinance when interest rates are low with a new loan that gives you lower monthly payments, you may be able to save money to make additional payments. Extra payments on the principal of your loan will help you pay your loan off faster.

3. Reducing the total interest you pay on your loan

Decreasing how much interest you pay over the life of your loan is another way you may be able to save by refinancing. The longer your loan is, the more you will have to pay in interest.

Refinancing to a loan with a shorter term can result in significant savings. You can use an online mortgage refinance calculator to get a general idea of how much you can save with different terms.

To give you a general idea of what’s possible, consider the following loan:

  • Loan amount: $300,000

  • Term: 30 years

  • Interest rate: 4.0%

If you plug this information into a mortgage refinance calculator, it shows that you will be paying $215,608.52 in interest over the life of the loan.

If you change the term to a 15-year loan, however, you will be paying $99,431.48 in interest. That’s a savings of over $115,000.

When Should You Consider Refinancing?

As a general rule of thumb, it’s worth checking with your lender to see if refinancing could result in savings if mortgage interest rates drop at least 1%. Everyone’s loan situation is unique, however, and many variables go into determining whether refinancing will result in savings. The 1% rule of thumb is not written in stone, and in some cases, it may be worth refinancing if the rate falls less than 1%.

An important thing to consider if you are thinking about refinancing is the closing costs of your new loan. Closing costs vary but are typically between 3-6% of the principal of the loan.

See How Much You Can Save With A Mortgage Refinance Calculator

If you are thinking about refinancing, a mortgage refinance calculator can give you a general idea of how much you can save with the current interest rate. In the calculator, you can make adjustments to the loan term to see how much you can save on interest and to see what your monthly payments will be.

Mortgage Refinance Calculator

Learn more about Listerhill's mortgage refinancing options

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  • The Great Giveback Official Rules

    1. Eligibility: No purchase or obligation necessary to participate and win. All participants must be 19 years of age or older at time of contest participation. Employees of Listerhill Credit Union are not eligible to register for the contest.

    2. How To Enter the Contest: All Listerhill members who have consumer loans in good standing, (subject to limitations below) are automatically entered. Anyone who takes out a new loan with Listerhill Credit Union, or refinances a loan from another lender with Listerhill Credit Union (subject to limitations below) will automatically be entered to win. Limit of one entry per loan.

    NO PURCHASE NECESSARY: To enter the contest without a loan, send a self-addressed, stamped envelope to: Listerhill Credit Union, P.O. Box 566, Sheffield, AL 35660, Attn: Great Giveback Contest Entry. Limit one entry per person. Written entries must be received no later than July 3, 2021.

    Listerhill Credit Union will not be responsible for incomplete, lost, late, misdirected or illegible entries or for failure to receive entries. All entries become property of Listerhill Credit Union and none will be returned. Any questions regarding the number of entries submitted shall be determined by Listerhill Credit Union in its sole discretion, and Listerhill Credit Union reserves the right to disqualify any entries by persons determined to be tampering with, violating, or abusing any aspect of the contest.

    3. Contest Entry Requirements: In the event the Credit Union, in its sole discretion, determines that any Entry contains content that does not comply with these Official Rules or does not otherwise comply with regulatory guidelines, Credit Union reserves the right to disqualify the entry.

    4. Determining the Winner: A Credit Union employee will select at random four (4) $500 winners (one per day July 12-15) and one Grand Prize Winner from all entries received on July 16, 2021. You do not have to be present to win.

    5. Prizes: $500 Cash Prize: the Credit Union will award four (4) members with $500 cash each. Grand Prize: The Credit Union will pay up to $25,000 toward your loan with Listerhill Credit Union, or combination of loans. No loan payments will be made to loans with any other lender. No cash equivalent provided, and the total prize amount may be less depending on the outstanding amount of loan balance(s) with Listerhill Credit Union. In no event will the prize awarded exceed the total amount of the winner’s outstanding balance of qualifying loans with Listerhill Credit Union. Federal, state and local taxes are the sole responsibility of the winner. IRS regulations require the Credit Union file a 1099 on behalf of the winner.

    A Credit Union employee will call the prize winners and the prize winners will be called up to five times during regular business hours at number provided on entry form and will leave no messages. Failure to reach winner during these calls may result in disqualification of winner, forfeiture of his or her interest in all prizes, and selection of a substitute winner drawn from the drum. Winner will be required to schedule a time, at least 48 hours in advance, to visit Listerhill Credit Union, located at 4790 2nd Street, Muscle Shoals AL, 35661 in person, during regular business hours within seven (7) days of being notified to claim prizes by providing proof of eligibility for prize won and completing and signing an affidavit of eligibility and a liability and publicity release. Failure of any Winner to timely contact the Credit Union, visit the above Credit Union office in person and sign and return any required affidavit and release, or to claim a prize or comply with any term or condition of these Official Rules, will result in drawing Winner's disqualification and the forfeiture of his or her interest in the prize. Winners may waive their right to receive prizes. Prizes are non-assignable and nontransferable. No substitutions allowed by winner.

    6. To be eligible to win, all loans must be in good standing (not more than 30 days past due at the time of drawing. Eligible loans are limited to auto loans (no indirect dealer loans), personal loans (no loans secured by real property, such as mortgages, 2nd mortgages, and Home Equity Lines of Credit) and recreation loans made to consumer borrowers (not business or commercial loans).

    6. Participation. By participating, entrants agree to be bound by these Official Rules and the decisions of the Contest. Except where prohibited, acceptance of any prize constitutes winner's consent to the publication of his or her name, biographical information and likeness in any media for any commercial or promotional purpose, without limitation the Internet, or further compensation. Prizes not won and claimed by eligible winners in accordance with these Official Rules will not be awarded and will remain the property of the Credit Union.

  • How do I redeem my Merchandise Rewards?

    The easiest way to redeem your Merchandise Rewards is to log into Listerhill’s Online Banking and click the “Get Info” link to the right of your credit card information. This will take you to our credit card servicing site within the same window. Select “Rewards” on the upper right side within the screen (below FICO Score) and on the next screen, click on the CURewards logo. This will automatically sign you in to be able to redeem your Merchandise Rewards points!

  • What are the benefits of becoming a Listerhill Works partner organization?

    1. Completely free program and zero liability to your company.

    2. Easy to implement – requires no additional staffing or resource allocation.

    3. Builds employee loyalty and helps your organization stand out in a competitive employment market.

    4. Encourages financially stable employees through free on-site financial workshops.

    5. Initial on-site employee orientation; re-orientations and free financial seminars available. Once signed up, our SEG partner organizations are offered a free 30-40 minute on-site orientation to educate employees about the benefits of belonging to the Listerhill Credit Union financial cooperative. This informative and helpful session gives your employees a chance to ask questions and learn about the many benefits, products and services that membership provides them. Once on board, we also offer Listerhill Works partner organizations free Lunch n’ Learn seminars for employees. Topics include creating a budget, paying for college, debt management and how to buy a home.

    6. Credit union support at benefit fairs and open enrollment.

    7. Same-day account opening – we can immediately assist your employees who would like to open an account during our visit.

    8. Free informational materials – We provide all materials at no charge, including brochures and financial wellness educational workbooks

    9. Free participation in employee benefits fairs, new employee orientation meetings and other organizational events.

    10. No hassle partnership – we do all the work!

  • How do your employees benefit from being a Listerhill Works partner?

    1. Lifetime credit union membership

    2. Competitive rates on a wide range of savings products like:

    • Share Savings
    • Money Market
    • Certificates
    • IRAs
    • My Goal Savings
    • Explorer Rewards

    3. A wide range of loan products like:

    • Auto loans
    • Personal loans
    • Recreational loans

    4. Competitive loan and savings rates.

    5. 24/7 account access with Smart ATMs, Online and Mobile Banking, or by telephone with Automated Access. The choice is yours.

    6. eStatements

    7. Overdraft protection

    8. Up to 3 overdraft refunds per year on us.

    9. First box of checks free when you open your new checking account.

    10. Free Visa debit card with rewards or a UNA Keystone Debit Card to show your #lionpride and give back to the University.

    11. Checking accounts with no minimum balance required.

    12. Interest-earning checking accounts

    13. Free Online Banking with features like:

    • Free Online Bill Pay
    • PopMoney
    • Notify Me Alerts
    • Personal Finance Manager

    14. 24/7 Access to Smart ATMS with features like:

    • Make a deposit
    • Get exact change
    • Make loan payments
    • Speak with a real, local representative

    15. Access to 5,000 CO-OP Shared Branches nationwide for easy access to your money wherever you go.

    16. Visa Platinum Cash Back card with 1% cash back on everything you buy.

    17. Visa Platinum Merchandise Rewards

    18. A full-service mortgage lending department and your mortgage stays with Listerhill for the life of the loan.

    19. A full-service financial planning department that gives you personalized, local service.

    20. Access to financial wellness education courses and information.

  • How does the Maintenance Fee contribute to Listerhill's sustainability?

    In the past, we charged a $10 Relationship Fee to help cover the cost of servicing members' accounts. We felt we could serve you better by removing this fee and establishing a lower fee based on your investment in the cooperative. Encouraging our members to save and borrow with us is key to Listerhill's sustainability, plus it creates value that it ultimately returned back to our member owners (like you!)