According to a recent report Bankrate.comless than 1 in 5, or about 19 percent of homeowners with pre-pandemic mortgages refinanced.
About half, about 47%, with mortgages before the pandemic have not yet considered refinancing, while more than a quarter, about 27%, have considered refinancing but have not actually refinanced yet. Also, 7% don’t know if they have refinanced their mortgage or not.
“The vast majority of mortgage borrowers have not refinanced yet, despite record low rates over the past year,” said the head of Bankrate.com. financial analyst Greg McBride, CFA.
Among the main reasons homeowners did not refinance include 32% believing it would not save them enough. Money, 27% say there are too many high commissions and closing costs, and 23% say there is too much paperwork and hassle.
Regardless, “cutting monthly mortgage payments by $ 150 or $ 250, and possibly more, can create a valuable respite in the household budget at a time when so many other expenses are rising,” McBride said.
Other reasons were also mentioned: plans to move or pay off loan credit rating problems will soon arise that are inadequate due to unemployment or decreased income due to exceeding them House worth, and finally, ignorance of the reason why they did not refinance.
“The most frequently cited reasons for refusing to refinance may not be supported in this ultra-low rate environment,” McBride continued. “Reducing your payments without out-of-pocket cash by including costs in your loan is one way to cut down on your biggest household expenses without hurting your savings account.”
Therefore, homeowners are advised to consider refinancing if they have not already done so, especially with current low interest rates, but this has become a daunting task, especially among homeowners who do not even know their current interest rate.
The report found that 38% of homeowners, including 54% of millennials with mortgages, do not know their current interest rate and therefore do not know if they can benefit from refinancing or not.
About 46% of the total number of borrowers with interest rates of 3 percent or more are likely good candidates for refinancing at lower rates.
To determine if refinancing will be profitable, take Bankrate as an example. For example, a 30-year loan of $ 300,000 at 4% would cost $ 1,432 per month. If you refinance up to 3%, it will cut your monthly expenses by up to $ 1,265, reducing your monthly payment by $ 167 or your annual payment by $ 2004.
Interestingly, the report found that 21% of millennials believe vacations and high-priced essentials are good reasons to use their home equity. Compared to Gen X and Baby Boomers, millennials are also more likely to view equity as a way to keep up with household accounts and make other investments.
Despite this, about 28% of millennials with pre-pandemic mortgages refinanced during the pandemic, more than Gen Z and baby boomers, where only 17% of both generations are.
Finally, the report found that homeowners with incomes of $ 50,000 or more were also almost twice as likely to refinance as households with incomes less than $ 50,000.