How to Refinance Your Home and Reduce Insurance Costs Together

If you’re a homeowner looking to lower your monthly expenses, refinancing your mortgage might be the first option that comes to mind. But here’s something many people overlook: refinancing can also be the perfect opportunity to lower your homeowners insurance premiums.

In 2025, with interest rates still shifting and insurers reevaluating risk more frequently, timing your mortgage refinance with a smart review of your insurance can lead to real savings both short-term and long-term.

Let’s break down how refinancing affects your homeowners insurance, how to negotiate with lenders and insurers, and how to reduce your total monthly housing costs.

What Happens to Your Homeowners Insurance When You Refinance?

When you refinance your mortgage, your new lender becomes the mortgagee on your homeowners insurance policy. This is a standard administrative update—but it also gives you a chance to:

Reassess your current coverage
Shop around for a better insurance rate
Bundle policies or increase deductibles

Key Insurance-Related Changes During Refinance:

Your lender may require a specific coverage level, especially for the dwelling.
You must show proof of insurance before the refinance can close.
The new lender may have a different policy on escrow accounts, which can change how you pay for insurance.

This makes it the perfect time to take a closer look at whether you’re overpaying—or overinsuring.

How Refinancing Can Lower Your Insurance Costs

Refinancing can reduce your insurance premiums in a few direct and indirect ways:

1. Improve Your Debt-to-Income Ratio

Lowering your mortgage rate and monthly payment can improve your overall financial profile. Some insurers factor this into risk assessments, especially when paired with a good credit score.

2. Update Your Home’s Value and Features

A refinance often includes a new appraisal. If you’ve recently made safety or structural upgrades (like a new roof, HVAC system, or security cameras), these may qualify you for insurance discounts.

3. Reassess Coverage Needs

You may have been overinsured based on outdated rebuild values or unnecessary endorsements. Use this time to ask:

Do I still need this amount of personal property coverage?
Is my deductible appropriate?
Am I paying for optional coverages I don’t use?

Tips for Coordinating Refinancing and Insurance to Maximize Savings

Tip 1: Shop Insurance the Same Way You Shop Loans

Get at least 3 quotes from reputable insurers while you’re gathering loan estimates. You don’t have to switch, but knowing your options gives you leverage.

Tip 2: Bundle Policies

Bundling home and auto insurance with the same provider can save you 15–25%. If you’re switching insurance companies during the refinance, use this as a chance to combine policies.

Tip 3: Ask for a Home Insurance Review

Many insurance agents will perform a free coverage review, helping you identify overlaps or discounts. Mention any home improvements or upgrades.

Tip 4: Raise Your Deductible

If you have a healthy emergency fund, increasing your deductible from $500 to $1,000 or $2,500 could lower your annual premium by 10–30%.

Tip 5: Improve Home Safety

Install or upgrade:

Fire alarms and carbon monoxide detectors
Water leak sensors
Smart locks or security systems

Insurers often give immediate discounts for these changes.

Negotiating With Lenders and Insurers: What to Know

Working With Lenders:

Clarify escrow requirements. Some lenders require insurance premiums to be escrowed; others don’t. This affects your upfront costs.
Ask if your new monthly mortgage payment includes insurance. Don’t assume it’s built in.
Negotiate closing costs—some may include lender-required insurance changes you can challenge or shop independently.

Working With Insurers:

Let them know you’re refinancing. Some carriers offer promotions for homeowners going through a mortgage change.
Don’t cancel your current policy until your new one is active.
Verify that your new lender’s name is listed on your insurance policy. This is legally required for closing.

A Real-World Example

Case Study: Angela in North Carolina

Angela refinanced her 30-year fixed mortgage from 6.1% to 4.3% in early 2025, saving $170/month on her mortgage. At the same time, she:

Switched homeowners insurance providers
Increased her deductible from $500 to $1,500
Bundled her auto policy

Total new monthly savings: $270
Annual savings: Over $3,200

All she had to do was time her insurance review with the refinance process.

Bottom Line: Do Both at Once for Bigger Gains

If you’re refinancing your home, don’t miss the opportunity to audit and optimize your homeowners insurance. By coordinating both processes, you can:

Lower your total monthly housing cost
Ensure coverage aligns with current needs
Possibly improve your insurance options thanks to an updated home profile

It takes a bit of extra effort, but the savings can be substantial—and long-lasting.

Next up: Thinking of renovating your kitchen or adding a backyard office? Learn whether refinancing or a HELOC is the better financing choice in our next article:
Refinancing vs. HELOC: Which Is Better for Home Renovations?