Little-Known Perks to Refinancing Your Mortgage -- Even if Interest Rates Are High

If you managed to secure a mortgage loan in the salad days of 3% rates in 2020 and 2021, you might feel very lucky indeed. As of this writing, the average rate on a 30-year fixed loan is sitting at 7.44%, according to Freddie Mac, a figure more than double the rock-bottom rate many people were fortunate enough to scoop up just a few short years ago.

If you got your loan before or since, or had a less-than-stellar credit score at the time, however, you might have locked in a higher rate and are waiting for the right time to refinance your mortgage. And you might assume that since rates are higher than they've been in several years, now is not the time. But wait! Here are a few perks to refinancing your mortgage, even when rates are up.

You could pay off your home sooner

The 30-year fixed-rate mortgage loan is extremely popular, and much lauded -- even investing great Warren Buffett is a fan. Stretching out a loan over three decades makes homeownership affordable for a lot of people for whom it would be an impossible prospect otherwise. That said, there are certainly benefits to be found in a shorter mortgage term, and one reason to refinance (even when rates are up) is to shorten yours.

Let's say you've changed jobs since you first signed your mortgage, and are now doing much better financially. You might decide to swap a 30-year loan with 25 years of payments left on it for a new 15-year mortgage instead, which will mean you'll end up with a paid-off home a full decade earlier. It might not be an ideal scenario if rates are up, but I'll note here that rates on 15-year loans are lower than they are on 30-year loans (less risk for the mortgage lender, after all). As of this writing, the average is 6.76% (according to Freddie Mac again). And if you've got a strong credit score, you might beat that average, too.

That said, you don't have to go as far as refinancing with a higher rate but a shorter mortgage term if you're hoping to get free of the loan sooner. Another option (and a cheaper one, too) is just to make extra payments on your current loan. One strategy for this is to pay half of your mortgage payment every two weeks rather than making your regular payment once a month. In this scenario, you'll end up making an entire extra monthly payment every year. You can also aim to apply any extra money you receive, such as a bonus from your employer or tax refunds, toward your loan.

You can add or remove a co-borrower

Another less-discussed benefit to refinancing your mortgage is the ability to change whose name is on the loan. Let's say that in the years since you got your home, you've gotten married or divorced. If your new spouse has excellent credit and a high income, adding them to your refinance application could pay off in helping you qualify for the best rate available now.

And if your ex had lousy credit and you were saddled with a higher rate than you wanted at the time you bought, shedding them from the loan could also help you get a better rate now.

You can pay off debt

Finally, a potentially overlooked reason to refinance, even with rates at 7% and above, is that accessing your home equity can help you pay off higher-interest debt, like that on a credit card. In this instance, you'd want to apply for a cash-out refinance, which swaps your old loan for a new one for a higher amount than you owe on your house. Then you get the difference in cash, and you can use it for whatever you want.

Given that the average credit card APR is 27.80% as of this writing (per Forbes), even if you refinance your mortgage to a rate of 7.5%, you're still coming out ahead. And since credit card interest accumulates very quickly, saving yourself stress and money this way can be a good idea.

Ideally, you'd be looking at lower rates if you're hoping to refinance your mortgage loan -- but rates are up and we don't know when they'll decrease to the level we've gotten used to these last several years. In the meantime, if you're considering a refinance, doing it for one of these perks might just be a solid move.