How much might you save?
In early January, the average rate on a 30-year fixed-rate mortgage dropped to an all-time low 2.65%, according to mortgage company Freddie Mac. Since then rates have drifted higher, though not too much higher.
Thanks to the current rates, some 16.7 million homeowners are in the sweet spot for refinancing and would see a serious financial benefit, the mortgage data firm Black Knight says in its February Mortgage Monitor report.
Together, today's refinance candidates could save a stunning $5.2 billion monthly by refinancing — which works out to average savings per borrower of $303 a month.
Black Knight's data takes into account the hordes of homeowners who already have refinanced. The company says would-be borrowers appear to be taking the potential savings seriously, because rate locks for refinance loans spiked during January.
During the early part of last month, refi applicants sought 90% more rate locks than a year earlier, "representing one of the strongest weeks of rate lock activity since the refinance boom kicked off in early 2020," Black Knight says.
Who should be refinancing?
Thirty-year fixed mortgage rates last week were averaging 2.73%, way down 3.45% a year ago, Freddie Mac says.
If you've got a mortgage taken out as recently as early last year and you haven't yet jumped on board the refi train, it's time to stop holding back. You're considered a good candidate if:
- You have 30-year mortgage with an interest rate you could reduce by at least three quarters of 1 percentage point through a refinance — say, go from 3.50% down to 2.75% or better.
- You have a good-to-exceptional credit score of at least 720. (If you haven't looked at your score in a while, you can easily take a peek at it for free.)
- You have at least 20% equity in your home, which means the money that you've paid in amounts to at least one-fifth of the home's current market value.
Why refinancers should move quickly
Homeowners who could refinance and reap the savings may not want to wait too much longer. Forecasters expect mortgage rates to rise this year.
Some lenders already have been raising their refi interest rates fall to pass along a 0.5% refinance fee launched in early December by Freddie Mac and Fannie Mae, the government-sponsored mortgage giants that buy most U.S. home loans.
Plus, mortgage rates in general are feeling pressure from rising Treasury bond yields. Those interest rates tend to have a lot of influence on the rates on home loans.
Treasury yields are being pumped up by investors who are feeling optimistic over the COVID vaccines and the new stimulus checks and other economic relief in the works in Washington.
If you want to get one of today's near-record mortgage rates locked while you have a chance, start shopping around ASAP. Check rates from several lenders to find the best deal available for your area and for a borrower with your credit profile.
Good comparison shopping skills also can help you save on your homeowners insurance. When your policy comes up for renewal, get multiple rate quotes to see if another insurance company offers the same coverage you currently have — but at a lower price.