lower mtg rate

No, the loan rate stays the same. If what you're talking about is making extra payments instead of refinancing, then you can consider any extra payments as investing those funds at the rate of your existing mortgage (with tax considerations). That can certainly make sense if your alternative investment is a money market fund or something similar.

The rate is constant. It just shortens the term.

And if you shorten the term, you lower the amount of interest you pay back. So I supposed you could look at it as essentially lowering your rate.

thats what i was thinking, i know your not lowering the rate on paper, but in theory

freezer, it's actually an easy and decent way to be financially prudent. You save interest payments, you shorten your term, and you have peace of mind sooner. Others will argue, but paying down debt quickly is *always* smart finance, and throwing in an extra mortgage payment once a year is doing just that.

You are not lowering your rate. You are, however, lowering the amount you owe a little bit each time you pay more. (You can also do this by increasing your monthly payment a little each month.) So you're paying the same rate on a (slightly) smaller balance, which means a little less interest and a quicker route to paying off the mortgage. There are some good calculators that show you the effect of extra payments. I like this one: http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx?ec_id=m1082525. Remember that if you're able to take a mortgage interest deduction your savings is not as high as the calculator suggest, but it is still real.

If you have a low mortgage rate and you are a smart/lucky enough investor, you might be better off investing that extra money. But for most of us, paying a little extra each month is, as Isle of Lucy says, prudent.