78% of homeowners didn't refinance their mortgage in the past year, survey finds: Why you should do it now
Mortgage refinancing is a smart move right now thanks to low average rates, but millions of homeowners still haven't taken advantage of this opportunity, according to a new Zillow survey. (iStock)
Record-low mortgage rates have given millions of American homeowners the opportunity to lower their monthly mortgage payments, save money on interest or even pay off their mortgages faster by refinancing. Just over a fifth (22%) of established homeowners refinanced their mortgages within the past year, according to a June 2021 Zillow survey.
But what about the vast majority of homeowners who didn't refinance? Millions of consumers are missing the opportunity to take advantage of current mortgage rates, and time may be running out to secure a low rate.
Lock in your mortgage rate today by getting preapproved on Credible. You can compare mortgage rates across multiple lenders at once without affecting your credit score, so you can shop around to get the lowest rate possible for your situation.
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The top reasons why homeowners didn't refinance
One of the primary reasons why homeowners didn't refinance in the past year is because they were considering moving or paying off their mortgage soon — 37% of respondents of the Zillow survey said so. This makes sense, because you may have to live in your home for a few years after refinancing in order to reap the full savings after paying closing costs.
Mortgage refinancing fees prevented 38% of homeowners from refinancing. But the cost savings of refinancing typically outweighs the closing costs after a certain period of time, which makes refinancing a smart financial move for many homeowners despite the fees.
About 29% of homeowners didn't refinance simply because they don't understand the process, a mistake that could cost them thousands of dollars worth of interest savings in the long run. Although mortgage refinancing may seem like a daunting task, it's actually quite simple. Get in touch with an experienced loan officer at Credible who can walk you through the mortgage refinancing process so you can see if this option is right for you.
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Homeowners who refinanced in the past year lowered their payments by hundreds
Most homeowners who did refinance their mortgage loans in the past year cut their monthly payments by at least $300, the Zillow survey found. About 29% saved between $300 and $500, and nearly a fifth (18%) saved more than $500 per month.
Thanks to the cost savings of mortgage refinancing, homeowners are using the extra money to reach other financial goals. A third of homeowners refinanced in order to pay off debt. This can present a good strategy for paying off high-interest credit cards while mortgage rates are low. A cash-out refinance may also grant you the opportunity to tap into high home equity and remodel your home to increase its value, for instance.
Nearly three-quarters (74%) of homeowners surveyed said they refinanced in order to reduce monthly expenses, which is a good way to increase your savings potential. Use a mortgage calculator from Credible to estimate your new monthly payment after refinancing.
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9 in 10 homeowners refinanced to take advantage of low interest rates
Mortgage rates are still hovering near historic lows, which means that it's still a great time to refinance your home loan. The majority (89%) of homeowners who refinanced in the past year did so to take advantage of the current interest rates, according to the survey.
This environment of low interest rates won't last forever, though. The Federal Reserve predicts two rate hikes by 2023, and the Mortgage Bankers Association predicts interest rates on a 30-year fixed-rate mortgage will be as high as 4.9% in 2023.
If you've been considering refinancing your mortgage, now is the time to do so. Consider refinance rates offered on Credible in early July:
- 30-year mortgage refinance: 2.750%
- 20-year mortgage refinance: 2.625%
- 15-year mortgage refinance: 2.000%
- 10-year mortgage refinance: 2.000%
It's important to shop around for the lowest possible refinance rate for your situation. On average, homeowners can save $3,000 over the life of a $250,000 mortgage by comparing five rate quotes, according to research from Freddie Mac. You compare multiple mortgage lenders and get free rate quotes without affecting your credit score on Credible.
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