The number of mortgage refinancing applications is dropping as mortgage rates have been rising in recent weeks. That may be scaring off some homeowners who could still greatly benefit from refinancing and locking in lower interest rates.
About 11.1 million borrowers are still in a position to save money by swapping their existing mortgage for a new one with better terms, according to Black Knight, a mortgage analytics company. These potential refinance candidates could save an average of about $277 per month. Further, more than 2 million homeowners could save at least $400 per month, and 1.2 million could save an average of $745 per month, according to Black Knight’s estimates. Borrowers who may have gotten a mortgage a year ago likely are among those who could benefit from refinancing.
The best refinancing candidates tend to have a credit score in the mid-700s or higher and at least 20% equity in their home. Such borrowers could decrease their mortgage rate by at least three-quarters of a percentage point (0.75%), according to Black Knight. Some homeowners may be able to get an even lower rate by getting a shorter loan term. For example, as of Sunday, the average 15-year refinance rate was 2.69% while the average refinance rate for a 30-year fixed-rate mortgage was 3.4%. Also, borrowers will want to factor in the closing costs to refinance, which can range from 2% to 6% of the loan amount.
“Though refinance rates may not be quite as attractive as they were in late 2020 or early 2021, they’re still pretty competitive on a historic basis,” reports The Ascent, a Motley Fool publication. “It’s a good idea to think about whether refinancing makes sense for you because it could end up making your home a lot more affordable to pay off.”
Source: “Over 11 Million Homeowners Could Save Big By Refinancing, Data Shows,” The Ascent/Motely Fool (April 18, 2021) and “Despite Rising Mortgage Rates: 11M Are Still Eligible to Refinance: Study,” Yahoo! News (April 1, 2021)