[thelastgallon]

Yes, you can refinance any time with nearly no cost. During covid years, a lot of homeowners refinanced multiple times, each time with a small bonus (under 3K) for refinancing.

What people don't understand though is interest payments are front-loaded. Most of the early payments will be almost all interest, and with frequent refinances most of them are paying interest all time time, extending mortgage by a few years. Most only think of cash flow and the payments appear lower, if you don't think about those extra years.

https://thepillmethod.com/help-us-celebrate-the-80th-anniver...

[thelastparadise]

> What people don't understand though is interest payments are front-loaded.

This is completely wrong. In the U.S. at least, interest is calculated based on the remaining balance.

It is not "front loaded" at all. It's just that your balance is highest at the start of the term.

A borrower can pay down extra principal at any time if they so choose and interest (absolute, not rate) will go down the next month.

[hnav]

you can just pay off the loan faster and put whatever interest cut you got towards the principal?

[throwaway2037]

   you can just pay off the loan faster

In the US mortgage market, this is called curtailment. For example, if you make one extra payment per year, you will shorten a 30 year fixed rate mortgage by about 4.5 years. Also, for most US mortgages, you are allowed to prepay 100% with no penalty. This allows for refinancing.

What I do not understand: Why don't more countries do this? Have large gov't financing companies that guarantee certain fixed rate mortgages? Overall, it is a huge win for the middle class home owner in the US.

[thelastgallon]

>For example, if you make one extra payment per year, you will shorten a 30 year fixed rate mortgage by about 4.5 years.

This doesn't sound right. If I make 5 extra payments (either in 1 year or over 4 years), the mortgage will be shortened by 5 x 4.5 years = 22 years. I'm sure everyone would do this, 5 extra payments is super easy!

[throwaway2037]

You misunderstood my original post. One extra payment per years means 13 mortgage payments, instead of 12. (Almost all US mortgages require monthly payments.) To be clear: This extra payment is strictly optional, but it used to demonstrate how curtailment can meaningfully reduce the life of your loan and the amount of interest paid.

[analognoise]

If you're fixed at 2 or 3%, why bother?

You can make a better return putting your money elsewhere.

[saiya-jin]

a common mantra, but almost nobody actually does it

[gorjusborg]

Also, the return is guaranteed in the case of mortgage repayment.

The returns from investment are estimated based on historical performance. You can lose money investing, not so paying off a mortgage early.

[bitshiftfaced]

At the very least, during periods when interest rates are significantly above your mortgage rate, such as now, you should put it in a money market account instead of in your mortgage. It's the same amount of risk, but it's liquid. Really, you could do a long term Treasury bond for the same reasoning (same risk, same liquidity).