Skip to Content loading...

Not a member yet?

Listerhill Credit Union is a nonprofit financial cooperative improving lives in our community.

If you live in Alabama, Georgia, Mississippi, Florida, or Tennessee, you are eligible to become a member. Depending on your individual eligibility, we may require membership into an approved association at no cost to you.

You can also qualify for membership by being a family member of a current or potential Listerhill member.

With only $5, you can join Listerhill today and start taking advantage of a lifetime membership.

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.

Editorial Note: Articles published are intended to provide general information and educational content related to personal finance, banking, and credit union services. While we strive to ensure the accuracy and reliability of the information presented, it should not be considered as financial advice and may be revised as needed.

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 our 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

default icon for Solution Finder Intro
What can we help you with? *
default icon for Checking For Mature Members
What are you borrowing for?
default icon for Checking For Mature Members
Vehicle Options
default icon for Checking For Mature Members
Home Options
default icon for Carrolls
What are you saving for?
default icon for Carrolls
How old are your kids?
default icon for Cord
Which of these banking options are you interested in?
default icon for Cord
How old are you (or your child)?
default icon for Cord
How old are you?
default icon for Cord
What kind of account are you looking for?
search popup background

What are you looking for?

Common Links

Frequently Asked Questions

  • What are some factors to consider when choosing a rewards credit card?

    Determine whether you prefer cash back, travel points, or other reward types. Then, explore how and when reward points accumulate, if there are spending caps, and how easy it is to redeem your rewards. Financial institutions like credit unions tend to offer great rewards credit cards.

  • How can I compare credit card offers before making a decision?

    Carefully review rewards programs, like cash back or travel miles, when comparing credit cards. Also, consider the rewards rate, interest rates, annual fees, and any additional benefits the card includes.

  • What are the benefits of choosing a credit union's credit card compared to others?

    Our credit cards reward you for making purchases. They feature competitive interest rates and fewer fees than traditional banks. Members benefit from personalized customer service. We work closely with you to understand your financial situation and needs.

  • What if I prefer to make my payments through a pre-authorized automatic payment arrangement (ACH)?

    Please contact TruHome at 844-203-3642 to set up automatic payments or visit here to set them up yourself.

  • What if I prefer to make my payments through the Listerhill Mobile Banking app or Online Banking?

    Unfortunately, when the transfer occurs, mortgages will not be displayed on our app or in online banking, but we are working to bring that functionality ASAP.

    In the meantime, please visit here to view all mortgage information and payment options.