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Calculator with  Refinance  on the screen.
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Low interest rates have spurred a wave of refinancing, as homeowners replace their mortgages with newer and cheaper ones.

Refinance lending was up 129% in 2020 compared with 2019 and last year saw the largest number of annual loan originations since 2003, according to property analytics provider CoreLogic. On average, millions of borrowers who have not yet refinanced could save $303 a month, according to mortgage data firm Black Knight.

Exactly how much a borrower can shave off their monthly payment will depend on the size of the loan, the repayment term and how much their mortgage rate drops.

What’s the best thing to do with the money you save by refinancing? “I don’t think you should use the proceeds to go gamble, but that’s me personally,” quips Frank Nothaft, CoreLogic’s chief economist.

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Use your mortgage refinance to build an emergency fund

To that end, Nothaft joins other experts in mapping out the smartest ways to maximize your refinance savings. The consensus? Create a cash cushion to help smooth the path to financial stability.

“If you’ve lowered your monthly payment by a hundred bucks a month, that’s a hundred bucks you can sock away in financial investments,” says Nothaft. “Put it in the bank, put it in a mutual fund, money market fund, whatever you prefer, and that helps to build your nest egg when you can use it for a rainy day or for your retirement.”

Personal finance experts generally recommend having a cash emergency fund that can cover at least three to six months of expenses, but generally say more is smarter if you own a home.

“We all know that homeownership comes with unexpected costs,” says Chris Moore, director of deposit and payments product strategy at Alliant Credit Union. “If you don’t have an emergency fund, you should use the money you save from refinancing to build up your emergency fund for at least 12 months.”

“You want to make sure you have your own safety net,” says Danielle Hale, chief economist for listing site “If you don’t or if it’s not big enough, you can use the savings to build up an emergency fund.”

Marcos Rosenberg, the head of U.S. consumer deposits at Marcus by Goldman Sachs, shares a similar opinion.

“With additional funds available, now may be the time to build your financial cushion,” he says. “Proactively building an emergency fund can help you tackle any unexpected challenges that might get in the way of you reaching your financial goals. Knowing you have additional funds can create peace of mind and help cover home and car repairs.”

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How to save your refi money

Moore also suggests pretending the extra savings never happened and paying yourself first with a monthly automatic deposit into a high yield savings account. “If you allow the savings to sit in your checking account, you’re likely to spend it,” says Moore. “But if you automate your savings, you will stick to your savings goals.”

When you look at your whole financial picture, a money market account might be the way to go. These bank accounts combine many of the features of checking and savings accounts.

“For some, refinancing can be a great way to save a few extra dollars each month,” says Kevin Quinn, senior vice president of retail lending at First Internet Bank. “One way to make that money grow even more is to deposit it into a money market account. These accounts can provide a higher than average interest rate.”

Like a savings account, money market accounts pay you interest on the account’s balance. In some cases, the interest rate will increase as your balance increases.

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What if I already have an emergency fund?

Pay off other debt

If you already have a sturdy emergency fund, first of all, good work. Now what? “If that’s taken care of, it’s a good idea to look at paying down non-mortgage debt, especially if it has a high interest rate,” says Hale.

Another approach is to pay off debt early on student loans, credit cards or car loans. “Usually, the interest on credit cards and auto debt is a little more expensive when you compare it with mortgages,” says Nothaft.

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Fund a future move

Baby Boomers who are game for moving might want to consider options for their future retirement location.

Nothaft says, “If you are thinking about retirement, and you’re thinking, about, gee, I like that little cottage at the beach or the bungalow up in the woods or hill, that might be something you could use the funds for too.”

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Pay off your mortgage faster

To level up your savings, Moore suggests continuing to make the same monthly mortgage payment as before the refinancing to pay off a mortgage sooner. Any extra money put toward your principal will also reduce the amount of total interest you pay.

Make home repairs

The flexibility of remote work and schooling has prompted a surge in home improvement and repairs.

“Especially for some of the smaller home repair projects, by saving up some of the additional cash you have each month from refinance, you could put that toward some home repair and home improvement,” Nothaft explains. “Usually, with the bigger projects, like if you’re refinishing the basement, you’re redoing the kitchen or you’re adding an extension to your home, those are usually big-dollar projects.”

More from Money:

6 Instances Where Refinancing Your Mortgage Could Actually Cost You Money

7 Easy Tips for Refinancing Your Mortgage While Rates Are Still Low

The Pros and Cons of Switching Lenders When You Refinance Your Mortgage

Having an Emergency Fund Is More Important than Ever. Here Are the 3 Best Places to Keep Your Savings