Procrastination has Actually Paid Off: Refinancing Our Mortgage

I cannot think of many examples where procrastination has paid off in either my life or in someone else’s life. Usually procrastination leads to extra stress, unanswered questions, potentially missed deadlines, and at the very least, one late night. In fact, I have given several examples on my blog of times when procrastination has cost me in health and on the stock market. The high cost of procrastination and the ensuing stress is what makes me generally a ten-minute-early gal. I like to be at places ten minutes early and regularly finish assignments weeks in advance. I even have all of my blog posts scheduled for the upcoming week by Sunday at noon.

But this time, procrastination has paid off for us.

We purchased our home in September of 2009 and took out a 30-year mortgage at 5.5% interest. What a fantastic deal! We had every intention of paying off our mortgage early, but over the last two years, we have put no extra payments towards the mortgage (I am just as surprised as you are). Part of the issue is when I looked into putting extra payments toward the mortgage it seemed like a complicated ordeal (excuse #1). This created a mental obstacle that has permitted us to only pay off a mere $3,000 in 30 months of payments. Given our history so far with only paying the minimum on this loan, I knew that the only way we are going to meet our goal of paying it off early is by locking in a shorter mortgage term.

Once we decided that refinancing was the key, all action to obtain this goal ceased. Like many of you I have watched as the interest rates on mortgages decreased even more, to the point where it is now cheaper than taking out a federal student loan. Because I remembered so clearly the closing process on our mortgage and how tedious and complex it all seemed (excuse # 2), I developed another mental obstacle against refinancing. The longer I put it off, the guiltier I felt. I thought I would look back six months or one year down the road and lament at the beautiful, historically low interest rates I had let slip through my fingers. And yet I still did nothing.

Fortunately for this typically-ten-minute-early gal, procrastinating on a mortgage refinance was just the ticket to reducing the interest rate even further. Six months ago when I had a company send me the initial paperwork (that I let get dusty on our desk), the interest rate on a 30-year fixed rate mortgage was 4%. Now, we have a locked-in fixed interest rate for 3% on a 15-year mortgage!

The total interest savings from the original 30 year loan will be a staggering $112,706. Talk about plugging up a financial leak! On top of this interest savings, there is an option to make bi-monthly payments instead of monthly payments, adding an extra mortgage payment each year. That means we will pay off the loan in less than 15 years (though it may be 15 years in total because we have all ready been paying on this mortgage for two years). The estimated extra monthly expense to shave approximately 15 years off of our mortgage is $219 per month (I took this number into consideration when calculating the interest savings). Sold.

Our refinance loan will close in the next 60 days. We have not read through all of the paperwork to a point where we are comfortable signing yet, and I know we will need to get some documentation together for the closing. But this is a very encouraging first step.

Have you refinanced a mortgage before? What was the process like for you? What is your previous and current interest rate? I’d love to hear other’s experiences.

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20 comments… add one

  • 3% is pretty amazing! Congrats on going with the shorter term, and thanks for the mention! :)
    Derek recently posted..Passive Income With a Cruise Ship

  • We bought our house in October of 2009 at 5.5% also! And wow that’s a really good deal. I think you’ve given me the push!
    Michelle recently posted..The Lifestyle Inflation Creep

    • FruGal

      I hope you find a great deal! It’s good to know we didn’t miss out on these great interest rates…

  • JT

    That’s awesome that procrastination paid off! I know there are a lot of people who have refinanced more than once as rates have fallen. Some might have even been too quick to pull the trigger, as closing costs don’t allow for savings even if rates fell further.

    I would consider purchasing a few mortgage points when refinancing to get the most out of the mortgage interest tax deduction. If you’re going to exceed the standard deduction only because of your mortgage interest, mortgage discount points really start making a difference to how much you actually pay (net of taxes) in the long-run.

  • Wow, 3%? That’s amazing! My parents have refied almost annually, seems that there’s no penalty against it so they keep doing it and saving money. Question for you: Are you able to change the terms of payment once you refinance more easily? Is that how you were able to build in bi-monthly payments?
    Azra, ReadyForZero recently posted..ReadyForZero Success Profile: Chuck

    • Thanks Azra! We’re excited as well.

      Have the closing costs added up at all for your parents? I guess if they are staying in their home for the long-term then they will come out ahead.

      For the refinance payment terms, I do not remember the option clearly typed out for bi-monthly payments the first go-round. So it appears that it is easier this time around to change the terms of payment (unless you mean after refinancing, going from monthly to bi-monthly).
      Amanda L Grossman recently posted..Stores have Evolved beyond a Space to Sell: 5 Things to do at Stores Besides Spend Money

  • That’s wonderful! Congratulations! In this case, procrastination paid off for you big time. It’ll be 15 years in no time, and your mortgage will be paid off. Nicely done! Also, I want to commend you on building such a nice blog.
    Anthony Thompson recently posted..Self Manager – How Being the Family Black Sheep Will Empower You

    • FruGal

      Thanks Anthony! I appreciate the encouragement.

  • That’s an excellent rate. I’m so focused on paying off our student loans that I haven’t looked into it. We are at 4.7 percent for 30 years.
    John @ Married (with Debt) recently posted..Frugal Living: Easy Ways to Save Money

    • FruGal

      4.7% is still a historically low rate–so bravo to you. Heck, even 5.5% was a good mortgage rate, it’s just we can get much lower now.

  • We’re actually looking at refinancing this month. We won’t be going from a 30 year to 15 year, but we’ll be dropping our interest rate over 1% and losing PMI, so it’s definitely a bargain for us!
    Andi @ MealPlanRescue recently posted..Second (Ever) Lifestyle Carnival

    • FruGal

      Woohoo!!!! Very excited for you guys. Good luck with the process.

  • Amanda, that is a pretty sweet rate. I’ve been so close to refinancing again (I did 2 years ago) but I have a hard time stomaching the thought of doing it again. We had to send in so much paperwork and the process took so long it felt like a full time job. I’m waiting for the 30 year to drop to around 3.625 and then that will be enough that I’ll have to pull the trigger!
    Car Negotiation Coach recently posted..How to buy a car with bad credit…Get a loan and then GET OUT of the loan!

    • FruGal

      Hi Geoff! I hope you are well.

      That’s great that you went through the process anyway–I am sure if you never refinance again you have locked in a historically low rate and saved yourself thousands of dollars.

      We are fortunate that it is a VA loan, so it is streamlined. But we will definitely be sending in a decent amount of paperwork.

  • 3% is a great rate! I recently refinanced as well. I had to use the HARP program because of the value. The only good thing was that it only took 2.5 weeks from application to closing. I was amazed! Good luck with your refi!
    Paul @ Make Money Make Cents recently posted..Weekly Recap # 2

  • Nice job guys. I highly recommend the 15-year fixed loan to my clients if they can swing the payment because it saves an enormous amount of money in the long run. Often procrastination hurts you, but it sounds like you guys did really well in this scenario. Rates dipped a little lower than what you got, but not enough to feel bad about it. You pretty much hit the bottom.
    Mark @ mortgagesbymark.com recently posted..A Mortgage Pro’s Tips On How to Shop for Mortgage Rates And Get a Really Great Deal

  • bryansam138

    This is realy good post. It is helpful site. I like it.

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