The day – Despite record rates, 78% of homeowners gave up refinancing last year

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Less than a quarter of established homeowners have refinanced their mortgage in the past year, although about half of those who have said they have reduced their monthly payments by at least $ 300. These savings were often spent on home renovations or paying off debt.

Zillow® surveyed over 1,300 homeowners who haven’t moved in the past year (end of April) to find out what motivated those who refinanced their mortgage, how much they saved doing so and what is holding others back .

While more than half (59%) of those surveyed have refinanced the mortgage on their current home at least once, only 22% of those surveyed said they have done so in the past year. Mortgage rates have been trending down since the winter of 2018, and 30-year fixed rates fell from 3.13% about a year ago to an all-time low of 2.65% in January of this year, according to the Freddie Mac Primary Mortgage Market Survey®, which analyzes the average residential mortgage rates since 1971.

While slightly above January’s record lows, rates are remarkably competitive – 2.93% as of June 17. Homeowners who recently refinanced rated the process as less difficult than a divorce or a strict new diet, but significantly more difficult than training a puppy.

“In general, refinancing a mortgage should be a little less intense than a few weeks at puppy training camp,” said Jonathan Lee, senior manager of Zillow Home Loans. “A few hours of online shopping, talking to a mortgage advisor and signing documents is a small price to pay for hundreds of dollars in potential savings per month, and goes a long way towards funding these dog training courses.”

Almost 9 in 10 (89%) homeowners who refinanced in the past year said low interest rates were a reason they refinanced, and almost 3 in 4 (74%) refinanced for reduce their monthly expenses. About a third of homeowners who refinanced did so to pay off their debts.

In terms of monthly savings made, about 29% of those who refinanced saved $ 300 to $ 500 per month, while 18% saved more than $ 500 per month. Almost half (45%) saved less than $ 300 per month, while the remaining 8% did not see monthly savings.

When asked why of those who hadn’t refinanced recently, 37% said they were considering moving or paying off their mortgage soon, and 38% said the fees were too high. About 29% of homeowners didn’t refinance because they said they didn’t understand the process.

A few simple steps can put homeowners on the right track to take advantage of today’s low rates, Lee said. Homeowners should start by looking at their financial goals and needs, then look for a lender they feel comfortable with, although Lee said buyers shouldn’t be afraid to negotiate to try and reduce the related repayable costs. at closing costs. Then simply set a rate and go through the normal underwriting, valuation and closing processes.

Zillow’s lender finder provides personalized mortgage and refinance results as well as lender ratings to help buyers find and connect with the lenders who best meet their unique needs.

Lee said one of the guidelines consumers have followed in the past is that if you can lower your rate by a percentage point or more, it should be financially wise to refinance. However, the house’s rapid appreciation pushed that number down. In addition to speaking with a qualified mortgage advisor,

Zillow’s refinancing calculator is an easy way to estimate monthly savings, fees, and breakeven points.

“There are a lot of advantages to refinancing a home right now. Reducing monthly mortgage payments is extremely popular. It can increase borrowers’ monthly cash flow by reducing the amount of interest paid on their loan,” said Lee. “The rapidly rising home values ​​also make cash refinances a great option, allowing homeowners to take advantage of the increase in their home equity and reinvest their savings in other areas, such as paying down their home equity. high interest debt, funding for tuition or the completion of a home renovation. project.”

For potential buyers stranded by intense competition in a hot housing market, a cash refinance to finance summer renovation projects could scratch the itch to improve livability – and a higher eventual resale value – on their current home. Record the appreciation of the house over the past year means homeowners now have more equity to draw on.

Some things clients can do in advance to ensure a smooth process are to gather the documents they need to verify their personal income, assets, and financial history. Checking your credit score and waiting to make major purchases after the close are also good ideas, Lee said.

Among those who have not refinanced recently, about 2 in 5 survey respondents (41%) said they were very likely, very likely, or absolutely certain to refinance, while 28% said they were quite likely. Of this group, almost half (49%) think they will refinance in the next year.

—Zillow


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