Refinancing a mortgage now could save a homeowner $293 a month, new data says. As it threw economies into chaos last year, COVID-19 ushered in the lowest mortgage rates ever seen — and the days of ultra-low rates aren't over yet.
Thirty-year mortgage rates climbed earlier this year as the vaccine rollout had investors feeling confident about the recovery. Now, with the Delta variant on the rampage, rates are falling again.
The recent decline has opened up more opportunities for homeowners to refinance their mortgages and slash their monthly payments and lifetime interest costs. Close to 14 million mortgage holders would see substantial savings by taking out a new loan, according to new research.
Typical refinance savings: close to $300 a month.
Rates on 30-year fixed-rate mortgages are currently averaging just 2.88% — down from April's high of 3.18% and not far from the January all-time low of 2.65%, according to the long-running survey from mortgage giant Freddie Mac.
With rates at today's levels, some 13.9 million U.S. homeowners are in the sweet spot for refinancing and could put a serious dent in their housing costs, the mortgage data and technology firm Black Knight says.
Together, today's refinance candidates could save $4.05 billion monthly by refinancing — which works out to average savings per borrower of $293 a month.
And for some, it gets even better: Black Knight says 1.7 million of those homeowners could see monthly savings of $740 via a refinance. The company has said its data takes into account the millions of homeowners who already have refinanced amid the pandemic.
Despite the past year's rock-bottom rates and hefty potential savings, many homeowners may have chosen to procrastinate rather than refinance. A recent Zillow study found 78% never traded in their loans over the past year.
Black Knight says you're a good candidate to refinance now if:
• You've got a 30-year mortgage with an interest rate you could reduce by at three quarters of 1 percentage point through a refinance — like go from 3.75% down to 3% or better. You might meet this criteria if your current mortgage is less than two years old, because 30-year fixed-rate mortgages were averaging 3.72% at the start of 2020.
• You have a good-to-exceptional credit score of at least 720. If you haven't looked in a while, it's easy today to get a peek at your credit score for free.
• You have at least 20% equity in your home, which means you've paid in 20% or more of the home's current market value.
Why refinancers should move quickly
Homeowners who could refinance and reap the savings may not have a much time to waste.
Experts say mortgage rates are bound to move higher as the economy improves and the Federal Reserve starts raising interest rates again. The Fed has indicated it's likely to do that during the second half of 2023, though some analysts say the central bank may have to move sooner if it needs to tamp down inflation.
If you've been on the fence about refinancing and are thinking about making the jump, check rates from several lenders to find the best deal available for your area and for a person with your credit profile.
Studies from Freddie Mac and others have shown that comparing a minimum of five mortgage offers is the key to saving thousands of dollars in lifetime interest costs.
You may find you're an ace at comparison shopping — which is a handy talent that also can help you save on your homeowners insurance. When your policy comes up for renewal, get multiple rate quotes to see if another insurance company offers the same coverage you currently have, but at a lower price.