Millions of homeowners can further reduce their mortgage payments with refinancing

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Even with mortgage rates soaring since the start of the year, millions of American homeowners can still benefit from a refi. Mortgage data firm Black Knight estimates that around six million homeowners could save an average of $275 a month by swapping mortgages.

This total counts homeowners defined by Black Knight as “high quality refinance candidates.” These are borrowers with credit scores of 720 or higher, who have at least 20% of their home equity, are current on their mortgage payments and are expected to reduce their mortgage payments by at least 0.75 percentage points. existing mortgages.

While 5.9 million owners may still be able to save a total of $1.6 billion each month, the Black Knight report acknowledges that this is a much smaller pool of good candidates. refi, which was nearly 20 million in 2020.

The average 30-year mortgage rate at the end of January was 3.71%, according to Bankrate. The Federal Reserve has signaled that an interest rate hike is imminent, possibly as early as March.

If you have a 30-year mortgage of $250,000 at 4%, your monthly payment is $1,194. Lower the rate to 3% and the payment drops to $1,054, a savings of $140 per month. Beware of closing costs, however, they can add thousands of dollars to the cost of refinancing.

Although higher than they were a year ago, mortgage rates remain low by historical standards, and banks are increasingly keen to help borrowers refinance.

To get the best deal on a mortgage loan:

Compare the prices. Closing costs and rates vary by lender, so get three quotes.

Understand the break-even point. This is when the monthly payment savings offset the amount of closing costs. This refinance calculator can help you decide.

Don’t chase the lowest rate. Yes, a low rate and a paltry payment are good, but make sure those benefits aren’t overwhelmed by closing costs.

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