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Survey says: Homeowners want to refinance — and it could save them $44,000 or more

Aly J. Yale
The Mortgage Reports contributor

In August, refinance activity was up by 458 percent

Mortgage rates have dropped nearly a full point in the last year, and as a result, refinancing has surged in popularity. 

In August, refinances accounted for a whopping 43% of all closed loans. That’s up from 29% only a year ago.

And those are just the homeowners who pulled the trigger.

According to a survey of The Mortgage Reports readers, the number of homeowners considering a refinance last month was up 458 percent compared to a year earlier. 

Rates did rise last week, leaving August’s near-record lows behind. But they’re still far below historic averages. If refinancing has been on your mind, now might be the time to lock your new rate. 

Check current rates from major lenders. Start here (Dec 8th, 2019)

Who’s refinancing in 2019?

It’s no wonder refinancing is in this season. Data from Black Knight shows that more than 9 million homeowners could shave up to 0.75% off their interest rate by refinancing. That equates to more than $260 per month and nearly $8,000 over the course of a 30-year loan.

The average loan balance for borrowers refinancing has jumped $16,500 since August 2018. This could indicate that homeowners are looking to refinance earlier in their loan terms. Considering interest rates have dropped almost a full point in just one year, there are big incentives to doing so.

In fact, Black Knight’s recent Mortgage Monitor report shows that 80% of all mortgages originated in 2018 have an interest rate at least 0.75% higher than current averages. Pre-2004 mortgages could also see big savings.

9.8 million homeowners stand to save up to $260 per month — or $8,000 over the life of their loan — by refinancing.

Rising home prices could also play a role in homeowners’ higher loan balances. According to property data firm CoreLogic, prices have increased 3.6% since July 2018. Markets in the western U.S. have seen the biggest jumps, with Las Vegas home prices rising 5.4% and Denver’s jumping 3.7% in just the last year.

Finally, lower down payments could also be to blame. Data from Freedom Debt Relief shows that average down payments are actually pretty low across the country. Out of 1,000-plus recent homebuyers surveyed, 41% said they made a down payment of 5% or less. Another 22% put down just 6 to 10%. 

Whatever the reason for these higher loan balances, one thing’s for certain: Homeowners are refinancing — and they’re doing it now.

If your interest rate is higher than current averages, it might be a smart move for you, too. 

Verify your new rate (Dec 8th, 2019)

How much could a refinance save you?

For many homeowners, refinancing can mean significant savings — both on short-term costs (your monthly payment) and long-term ones (the lifetime interest you pay). Exact amounts depend on your current loan balance and interest rate.

Let’s look at a real-life example.

The average refinancing homeowner last month had an existing interest rate of about 4.5%. Experts predict that mortgage rates will land anywhere between 3.3% and 4.25% for the rest of the year — all of which fall below that August average.

What exactly would these rates mean for your wallet? Here’s a quick breakdown of the lifetime savings you could see by refinancing before 2019 comes to a close:

  • Conservative estimates, 4% rate: $12,800
  • Steady estimates, 3.5% rate: $35,800
  • Optimistic estimates, 3.3% rate: $44,800

*Loan assumptions: The cost analysis above is based on a 30-year fixed-rate loan of $225,000 at 4.497% interest, with a balance of $221,000 and closing costs equal to $4,000 at the time of refinancing. Payments shown do not include taxes, insurance, or HOA dues. 

Keep in mind that many homeowners have rates much higher than the 4.5% average. In 2010, many mortgages had a 5% interest rate or more. Between 2006 to 2008, rates were well into the 6% range.

If your rate is significantly higher than the current average, the total savings over the course of your loan could be huge.

The Bottom Line

Refinancing essentially resets your mortgage loan, and while that can be a scary thought, the fact is it’s the smartest financial move for many homeowners — especially if you’re paying a much higher interest rate than you need to.

Given historic rates, today’s current rate, and experts’ predictions for the rest of 2019, it’s safe to say that refinancing by the end of the year could equate to at least some financial savings (if not significant ones) for a large share of homeowners.

Are you curious how much you could save on your mortgage loan? Then shop around and see what rates you could qualify for today.

Verify your new rate (Dec 8th, 2019)