I Raised My Mortgage Payment by Refinancing. Here’s Why I Don’t Regret That

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It’s a move that still paid off financially. 

In August 2020, the average 30-year mortgage rate fell to under 3%. Since I had a higher interest rate than that on my existing mortgage loan, I decided to jump on the opportunity to refinance. And at first, my thinking was that doing so would lower my monthly payments.

But then I decided to refinance in a manner that would raise my monthly payments. And I’m really happy I did.

When a higher mortgage payment isn’t a bad thing

While mortgage rates were way down for 30-year loans at the time I decided to refinance, they were even lower for 15-year loans. So I reached out to some refinance lenders, crunched the numbers, and realized that refinancing to a 15-year mortgage would raise my monthly payments by about $300.

But that’s a good thing. While I’m spending more money each month on my mortgage payments now than I was a few years ago, I’m also on track to pay off the loan much sooner. At the time of my refinance, I had about 22 years left on my mortgage. So this cuts that repayment period by seven years.

Also, I’m saving myself a boatload of interest by virtue of both having a lower interest rate on my home loan and having a shorter time frame for paying it off. That’s money I can use for other purposes, like investing.

Sometimes, it pays to raise your mortgage payment

For many people, the lure of refinancing is rooted in the opportunity to spend less money on housing payments each month. But in some cases, refinancing to a shorter-term loan than what you have can make a lot of sense.

Of course, if you’re going to go this route, you’ll need to make sure you can swing those higher monthly payments. I ran the numbers carefully before committing to spending an extra $300 a month on my mortgage. But because I specifically bought a house that was under my budget in the first place and made a 50% down payment on it, I knew I had the leeway to spend a little more on my home and still not struggle.

Now that said, no sooner did I raise my monthly mortgage payments when my property tax bill rose. That was a little stressful. But it was also something I was anticipating given that property values were rising. And because I accounted for that when crunching my numbers, it didn’t create a problem, thankfully. But if you’re thinking of raising your mortgage payments, make sure to leave yourself wiggle room in case another related expense happens to increase on you at the same time.

Of course, these days, mortgage rates are still pretty high, so it’s not the ideal time to adopt the strategy I pursued in the summer of 2020. But if rates dip back down, it’s a strategy you may want to consider yourself. This especially holds true if paying off your home sooner rather than later is important to you.

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