According to a survey, 74% of homeowners do not refinance.


Many American homeowners are missing out on a great opportunity to reduce interest rates and their monthly payments by refinancing their loans, according to a new Bankrate study.

Most savvy homeowners have refinanced before, and some homeowners have even refinanced twice, but still take advantage of mortgage rates that were once considered insanely low. Some people don’t. According to a survey, 74% of homeowners who had a mortgage before the pandemic have not refinanced.

Greg McBride of CFA, chief financial analyst at Bankrate, said: “Reducing monthly mortgage payments by $ 150 or $ 250, and in some cases even more, can give households valuable leeway when many other costs rise. . “

The most common reason homeowners don’t refinance

The most cited reason among unrefinanced homeowners was that they had not saved enough money to justify refinancing. The choice was cited by 32% of respondents.

“You might want to rethink it,” McBride says. “The rates today are at a level not seen before last year.”

For example, if you have a 30 year loan of $ 300,000 at 4%, your monthly payment is $ 1,432. The 3% refinance comes down to $ 1,265, saving $ 167 per month or $ 2,004 per year. You can use Bankrate’s refinance calculator to see if refinancing can save you money.

The second most frequently cited objections are closing costs and fees. Twenty-seven percent of respondents cited it as a barrier. That’s right, closing costs can cost you thousands of dollars, typically 3-5% of the loan amount. However, if you can significantly reduce the rate, you can recoup those closing costs.

Another common dissenting opinion is that there is too much paperwork to refinance. This is a barrier for 23% of those who have not yet refinanced.

“Isn’t it worth spending hours saving $ 30,000 over the next 10 years? McBride asks.

About 14% of people who have not refinanced say they plan to transfer or pay off their loan soon. It can take years to pay off closing costs, which is a good reason not to refinance. Therefore, refinancing is ideal for homeowners who plan to maintain a new mortgage for years to come.

Additionally, 12% say their credit rating is too low to refinance. This can be another credible reason not to refinance – most mortgage borrowers in 2021 have higher credit scores. Make sure you pay off your mortgage right away, because on-time mortgage payments are one of the best ways to boost your credit score.

Whatever the reason for not refinancing, McBride says he needs to take a close look. “The most common reason for not refinancing is being able to resist in this ultra-low interest rate environment,” he says.

If you’re worried about putting yourself in cash to pay for your closing costs, consider carrying those costs against your loan balance (called a mortgage with no closing costs), McBride said. Said.

More than a third of homeowners don’t know about mortgage rates

About 38% of homeowners with a mortgage, including 54% of Millennials, don’t know about interest rates. Those who knew the mortgage rate reported a median of 3.57% and an average of 4.57%.

These two levels are well above current rates. This means that homeowners can save a lot of money with refi. In another study, mortgage data firm Black Knight said 15 million U.S. homeowners are able to save money by refinancing.

Keeping track of your mortgage rate should be a simple matter of checking your monthly statement or contacting your mortgage agent. If you’re one of the homeowners who doesn’t know your mortgage rate, getting an answer should be your first step. To understand if you can qualify for refinancing at your current rate, you need to know your current rate.

Refinancing trends vary by generation and income

About 28% of millennials (Americans aged 25-40) refinance, compared to 17% of Gen X (41-56) and 17% of baby boomers (57-75). ..

Baby boomers are more likely to think refinancing isn’t saving enough money (vs. 37%, Gen X 29%, Gen Y 21%). Gen Xers are most likely to point to fees and closing costs as barriers to refinancing (34% vs. 27% for baby boomers and 20% for millennials).

Homeowners with household income over $ 50,000 are almost twice as likely to refinance as homeowners with household income below $ 50,000 (only 13%) (24% refinance).

The most common reasons to use home equity

Bankrate also asked homeowners who hold mortgages what they thought was a legitimate reason for using mortgages. Home improvements or repairs lead the way, with 60% of respondents, followed by debt consolidation at 44%. Homeowners can cite several reasons.

Other reasons that are not often cited include maintaining regular household expenses (19%), paying school fees or other education expenses (19%), other investments (16%) and vacations (7%). ) It is included.

How to refinance your mortgage

Step 1: Set clear goals. There are compelling reasons to refinance. It can lower your monthly payments, shorten your loan term, take out equity for home repairs, or pay off higher interest debt. You can also run HELOC in refi.

2nd step: Check your credit score. You must be eligible for refinancing, just as you would get approval for your original mortgage. The higher the credit score, the higher the refinancing rate offered by the lender and the more likely it is that the underwriter will approve the loan.

Step 3: Determine the amount of equity in your home. Your mortgage is the value of your home that is more than what you owe your mortgage lender. To find this number, check your mortgage statement to see your current balance. Next, check your online home search site or have your real estate agent perform a scan to find your current home estimate. The equity in your home is the difference between the two. For example, if your home has $ 250,000 in debt and it is worth $ 325,000, your home’s assets add up to $ 75,000.

Step 4: Buy multiple mortgage lenders. Getting quotes from multiple mortgage lenders can save you thousands of dollars. Once you’ve selected a lender, discuss the best time to set the rate so you don’t have to worry about the rate going up before the loan ends.

Step 5: Thank you for organizing your documents. Collect recent payslips, federal income tax returns, bank statements, and anything else required by mortgage companies. Your lender also sees your credit and equity, so please disclose your assets and liabilities in advance.

methodology asked YouGovPlc to investigate. All issues are from YouGovPlc, unless otherwise noted. The total sample size was 3,657 adults, 1,041 of whom had a mortgage. The fieldwork was conducted from July 26 to 29, 2021. The survey is conducted online and meets strict quality standards. We adopted a non-probability sample by using both quotas in advance during collection and then using an upstream weighting scheme designed and proven to provide nationally representative results. ..

Home sales, including Dallas, surged as mortgage rates approached all-time lows.

Low mortgage rates are not motivated

According to a survey, 74% of homeowners do not refinance.


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