Should I refinance my mortgage, or invest the extra cash instead?
TL;DR: After refinancing to a lower rate, whether to apply the freed-up cash toward extra principal payments or invest it depends on the same rate-comparison logic as any prepay-vs-invest decision — compare your new (lower) mortgage rate against your realistic investment return.
What refinancing actually changes
A lower rate reduces your monthly payment or shortens your payoff timeline (or both, depending on how you structure it) — but it also resets the prepay-vs-invest math, since the rate you're comparing against your investment return is now different.
Don't forget the refinancing costs
Closing costs and fees on a refinance need to be recovered through the new rate's savings before it's a net win — calculate your break-even month on the refinance itself before deciding what to do with any freed-up cash.
Run the actual numbers on your loan
Get Rid of My Loan compares your full payoff plan against paying only minimums, with the exact interest saved shown — the same rigor applies whether or not you've just refinanced.
Build my payoff plan — $9.99 →Frequently asked questions
Is refinancing always worth the closing costs?
Only if you'll stay in the home long enough past the break-even month to actually realize net savings — refinancing shortly before a planned move can mean the costs never get recovered.
Should I refinance to a shorter loan term?
It can save significant total interest if the higher monthly payment fits comfortably in your budget, but it removes flexibility — a longer term with voluntary extra payments gives you the same payoff potential with more room to adjust in a tight month.