With mortgage rates still hovering near all-time lows, many homeowners are refinancing their homes to secure long-term savings. Whether looking to reduce their interest rate, lower their monthly payment or term, or to-cash out, refinancing in today's market offers a number of financial benefits.
Refinance applications are up 111% over last year according to the Mortgage Bankers Association, but a recent study by Bankrate revealed an alarming fact — less than half of American homeowners have considered refinancing in 2020.
More alarming — according to Bankrate's Chief Financial Analyst, Greg McBride, 25% aren't aware of their current rate.
“Millions of homeowners could be missing out on tens of thousands of dollars in savings by not refinancing their mortgages at this year’s record low rates. Roughly 8-in-10 homeowners with a mortgage have not refinanced and more than 1-in-4 doesn’t even know what rate they’re paying.”
While the reasons for not refinancing are plenty, homeowners are missing out on a tremendous amount of potential savings, simply by not checking what they qualify for. In a favorable market seeing the lowest mortgage rates since Freddie Mac began tracking them in 1971, that mistake could come with a considerable price tag.
For example — a 30-year conventional $350,000 mortgage loan at 4% interest results in $251,542 in interest over the life of the loan.
That same loan at today's lowest rate of 2.5%, however, equals $147,851 in interest — a difference of $103,691 over the life of the loan, or $3,456 per year.
With a third of U.S. homeowners are currently paying 4% interest or more on their mortgage, now is the exact time to explore options for a better financial future.
As history suggests — once the rates inevitably rise, it might be a while before an opportunity such as this one presents itself again.