As refinancing sweeps the US, some miss out
More than 2.3 million refinance loans were processed over April, May and June of this year, making it the biggest quarter for refinancing in almost 17 years, according to the new report from mortgage data firm Black Knight.
Refinance originations in the second quarter skyrocketed more than 200% compared to the same time a year ago, and jumped 60% from the first quarter.
But at today's mortgage rates — with 30-year fixed-rate home loans averaging a little under 3% — there are still nearly 18 million good refi candidates out there who haven't yet applied for a new loan, Black Knight says.
You're considered to be in a good spot to refinance if:
- You could get a new loan that would cut the rate on your 30-year mortgage by at least three-quarters of 1 percentage point (like, from 3.75% down to 3% or lower).
- You've got good credit, namely a credit score of 720 or better. If you're not sure where your credit score stands, you can check it for free.
- You have at least 20% equity in your home. That is, you've paid off 20% of the value.
Black Knight has said previously that candidates who fit that profile could save an average of around $290 a month — about $3,500 per year — by refinancing to a lower rate.
Why refinancers need to move quickly
The current, July-through-September quarter could be even more masive for refinances than the second quarter was, for a couple of reasons. First of all, lots of borrowers took the intial steps during the spring, and those mortgages are being completed now.
"Locks on refinance loans expected to close in the third quarter, assuming a 45-day lock-to-close timeline, are already up 20% from Q2," says Ben Graboske, president of Black Knight Data & Analytics, in a news release.
Also, homeowners are likely to take the advice of experts and apply for loans before lenders bake a new refinance fee into their interest rates. That could begin happening as early as October.
The 0.5% surcharge will apply to refinance mortgages over $125,000 that lenders plan to sell to Fannie Mae or Freddie Mac, the big government-sponsored enterprises that insure most of America’s home loans.
When the fee was initially announced in mid-August for a Sept. 1 start date, 30-year mortgage rates soared within days, from an average 2.82% all the way up to 3.14%, according to Mortgage News Daily. Following an outcry, the fee was delayed.
If you want to refi while rates are still low, it's time now to shop around to find the best deal. Freddie Mac research has found that getting more than one mortgage quote could save you $1,500 — and if you get quotes from five lenders, you could save an average of $3,000 of the life of the loan.
Comparison shopping also can help you see if you've got the best rate on your homeowners insurance. Gather quotes from multiple insurance companies to make sure you're not paying too much for your coverage.
Where refinancing is red hot
Another report, from Attom Data Solutions, identifies the cities where refinance activity has really been sizzling thanks to steeply discounted mortgage rates.
Refinance originations rose from a year ago during the second quarter in all but one of 211 U.S. metropolitan areas that Attom studied. The year-over-year increases were biggest in these markets:
- Madison, Wisconsin: up a stunning 403.7. That's a more than fivefold jump.
- Hilton Head, South Carolina: up 358.7%.
- Charleston, South Carolina: up 322.4%.
- Greenville, South Carolina: up 321.8%.
- Lincoln, Nebraska: up 269.2%.
The smallest uptick in refi activity was in Lexington, Kentucky, at 7.5%.
Pittsburgh was the only major metro area to see a decrease in refinances over April, May and June.
No matter where you live, you still have time to snare a mortgage rate under 3% — and enjoy big-time savings by refinancing. Just don't wait until that fee starts having an impact.