In January 2021, the interest rate on an average 30-year fixed-rate mortgage declined to 2.65 percent. This was down from 3.13 percent. The interest rate decrease represents a great opportunity for existing homeowners to save money or to draw out equity through a refinance. However, over the last 12 months, only 22 percent of homeowners took advantage of this opportunity. Why are so many homeowners turning away from this great opportunity?
There are three primary reasons why some homeowners are choosing to keep their existing mortgage in place. One of these is refinancing fees. A lower interest rate could save a homeowner money, but high loan fees could negate that benefit. When some homeowners have done the math, they have realized that the benefits of refinancing are not aligned with the fees. The specific benefits vary from owner to owner, so it is important for each owner to explore his or her options.
Another reason why some homeowners have not refinanced their current mortgage is their future plans. For owners who plan to move within the next year or who are looking at a full loan payoff, refinancing may not make financial sense.
The final reason why some homeowners are standing on the sidelines is that they do not understand how refinancing works. While refinancing a mortgage is more time-consuming than applying for a credit card, the reality is that many homeowners who fall in this group may be missing out on the opportunity to save thousands of dollars in interest charges over the next several years or longer.
If you are a homeowner, you owe it to yourself to explore the benefits of refinancing. To learn more about refinancing and to get firm details on current rates and fees, contact the MortgageDepot team today.
Connect with one of our loan consultants to learn more.