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4 Possible Benefits of Refinancing Your Mortgage with Guaranteed Rate

By: Carolyn Fitchard

Mortgage Refinance Guaranteed RateThinking of refinancing your mortgage? Locking in a lower market rate could reduce your monthly payments and leave you with more cash on hand for everyday expenses. The refinance pros at Guaranteed Rate, one of the largest retail mortgage lenders in the United States, have everything you need to know about the benefits of refinancing and whether it’s right for you. They also demystify the refinance process with expert guidance and easy-to-use online tools. 

What Is a Mortgage Refinance? 

When you refinance your mortgage, you pay off your existing loan and replace it with a new one. This is done for a variety of reasons, such as to lower your interest rate, convert to a fixed-rate mortgage, or tap into home equity to fund major purchases. In order to refinance, you’ll need to undergo a new loan application process and cover closing costs.   

Common Types of Refinance:

  • Rate-and-Term Refinance: Where the borrower switches to a lower interest rate, changes their mortgage terms, or both.
  • Cash-Out Refinance: Where the borrower extracts equity from their home in the form of cash.

Benefits of Refinancing Your Mortgage

1. Get lower monthly payments. 

One of the biggest benefits of refinancing your mortgage is reducing your monthly payment. In 2020 alone, borrowers averaged $2,800 in savings when they refinanced, according to Freddie Mac. That’s more cash on hand to use for groceries, utilities, and other household expenses.  

2. Get cash to consolidate debt or finance projects. 

If you choose a cash-out refinance, you can take out cash to consolidate debt or fund college tuition, home renovations, or other big expenses. You’ll need to have established at least 20% equity in your home to be eligible for this type of refinance. 

3. Change to a fixed rate.

If you have an adjustable-rate mortgage (ARM), which fluctuates with the market, you could get more financial stability by refinancing to a fixed-rate mortgage.  

4. Pay off your loan sooner.

If you switch from a 30-year mortgage to a 15-year mortgage, you’ll reduce the amount of interest needed to pay off your home. This option makes sense for borrowers who can handle higher monthly payments with reduced interest rates. 

When Should You Refinance? 

The general rule of thumb is to refinance when the market rate dips 1% below the interest rate you currently pay. But if you plan on selling your home in the next year or two, refinancing might not make much financial sense, as the closing costs and fees might be more money than you can offset with lower monthly payments for the first few years. You should also consider the length of your existing mortgage and whether it’s worth extending your interest payments with a refinanced loan.  

This post was sponsored by Guaranteed Rate, but was independently researched by the Groupon Coupons team.

NMLS ID 2611 / NMLS Consumer Access / Licensing Information

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply, contact Guaranteed Rate for current rates and for more information.
Savings, if any, vary based on consumer’s credit profile, interest rate availability, and other factors.
Using funds from a Cash-out Refinance to consolidate debt may result in the debt taking longer to pay off as it will be combined with borrower’s mortgage principle amount and will be paid off over the full loan term.