How Refinancing Could Lower Your Monthly Payment

One of the biggest reasons homeowners refinance is simple: they want a smaller monthly payment. It's a completely reasonable goal, and refinancing can be one of the more effective ways to get there. Here's how it actually works.

Two main ways refinancing can lower your payment

A lower interest rate: If you can refinance into a lower interest rate than what you currently have, less of your payment goes toward interest and more goes toward paying down what you actually owe. Even a small drop in rate can add up to real monthly savings.

A longer payoff period: Stretching your mortgage out over a longer period of time lowers the size of each individual payment, even if the rate stays the same. Your payments become smaller, though you'll be paying over more years.

Many homeowners use a mix of the two to get the payment that fits their life today.

A simple way to picture it

Think of your mortgage payment like a monthly bill. If that bill has been the same size for years while your income or expenses have shifted, refinancing is a way to resize that bill so it fits your current budget better, rather than the budget you had years ago.

It's not just about the payment size

While a lower payment is often the main goal, refinancing can also come with other benefits at the same time, like:

• Bundling your debts into one simple payment
• Accessing cash from your home's value for other goals
• Switching to a rate type that feels more comfortable, fixed or flexible

Is a lower payment always the right goal?

Not necessarily, and that's okay. A longer payoff period means more time paying interest overall, so it's worth weighing a lower monthly payment against the bigger picture. This is exactly the kind of trade-off worth talking through with someone who can walk you through your specific numbers.

See what it could look like for you

Every homeowner's situation is different, and the best way to know what refinancing could do for your payment is to run your actual numbers. Reach out to Ken Tucker to discuss your unique situation. 

Book a free call by clicking here or call 416-988-5626.

Learn more about how refinancing can help in our Refinance blog series here.