Homeowners may be missing out on the chance to save up to thousands of dollars a year through refinancing, according to new research from Bankrate. According to the report, only 19% of homeowners reported refinancing mortgages they received prior to the pandemic since the outbreak began.
Forty-seven percent of homeowners said they are not considering refinancing their mortgages, which is an unexpected discovery given record low interest rates in the US.
Average mortgage rates increased slightly since hitting record lows last year, although they remain well below the averages from previous years. Thus, refinancing rates were abnormally low; some mortgages have refinancing rates below 3% or even 2%…
“Thirty-eight percent of homeowners with mortgages do not know their current interest rate,” the study found, “making it impossible for them to know if they can benefit from refinancing.”
The Bankrate report notes that homeowners who don’t spend time and effort figuring out their interest rates may be missing out on a valuable money-saving opportunity.
“I think it’s kind of out of sight, out of sight,” Greg McBride, chief financial analyst at Bankrate.com, said in a recent interview with Yahoo Finance. Many homeowners signed contracts years ago and don’t remember their rates anymore.
Curiously, the age group most likely to refinance their mortgages, millennials, also most likely did not know about mortgage rates – 54% of millennials did not know their rates, which is the highest rate among all generations, despite the high rate. poll at 28%. of them reported refinancing their pre-pandemic loans. Only 17% of Gen X (age 41-56) and baby boomers (age 57-75) reported pre-pandemic mortgage refinancing.
“I’m worried about the high rate of millennial borrowers who don’t know their rate; they may be oblivious to the enormous opportunity that currently exists. “
For homeowners, he said, a good rule of thumb is that “if interest rates are half a percent or more below what you are currently paying, you can refinance profitably.”
After the pandemic, house prices have risen substantially, making the housing market the hottest in years.
“This can generate some pretty significant savings every month,” McBride said. “Refinancing your mortgage can cut your payments by $ 100, $ 200, or even $ 300 a month. Well, this is tantamount to a salary increase. This is real money. Especially at a time when households are bombarded with rising prices for just about everything else, this money has to come from somewhere. ”
According to a Bankrate study, refinancing money is commonly used to fund home renovations, debt consolidation, regular household bills, tuition fees, or other investment opportunities.
Thirty-two percent of those who did not refinance cited lack of expected savings as the most important reason for their decision. Twenty-seven percent indicated high closing costs / fees associated with refinancing.
While fees can be costly, some recent policy changes in the housing market have made this wrong.
“One commission charged on most mortgages since last year has been canceled,” McBride said. “The Federal Housing Finance Agency estimated the commission at half a percentage point of the loan amount guaranteed by Fannie Mae and Freddie Mac. Since then this fee has been canceled. “
In addition, the current housing market is a more suitable environment for refinancing. “The rise in house prices has meant that most refinancing borrowers can include these costs in their loan rather than pay them out of pocket,” added McBride.
Ihsaan Fanusi is a writer at Yahoo Finance. Follow him on Twitter @IFanusie…