How much can you save?
Rates on 30-year fixed-rate mortgages are currently averaging 2.81% according to the long-running survey from mortgage company Freddie Mac. They're just a hair above the recent record low of 2.80%.
With rates at those levels, some 18.5 million U.S. homeowners are in the sweet spot for refinancing and would see a substantial benefit, the mortgage data firm Black Knight reported Monday. That's way up from the 10.4 million mortgage holders who had an incentive to refi at this time last year.
Together, today's refinance candidates could save $5.6 billion monthly by refinancing — which works out to average savings per borrower of $304 a month.
You think that's good? Black Knight says 2.5 million of those homeowners could save $500 or more every month through a refinance. The firm notes that its estimates factor in "the millions of homeowners who have already refinanced this year."
Who should be refinancing?
The final numbers for July, August and September are likely to show refinancing hit a record during the quarter, Black Knight says. Earlier research indicated that Americans this year have been eagerly refinancing at more than triple the rate of a year ago.
Want to hop on board the refi train? You're considered a good candidate if:
- You've got a 30-year mortgage with an interest rate you could reduce by at three quarters of 1 percentage point through a refinance — like go from 3.75% down to 3% or better. You might meet this criteria if your current mortgage is only a matter of months old, because 30-year fixed-rate mortgages were averaging 3.72% at the start of 2020.
- 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 get a peek at it for free.
- You have at least 20% equity in your home, which means you've paid in 20% or more of the home's current market value.
Why refinancers should move quickly
Homeowners who could refinance and reap the savings may not have a whole lot of time to waste.
Some lenders have been raising their refi interest rates this fall to pass along a new 0.5% refinance fee being imposed by Freddie Mac and Fannie Mae, the government-controlled mortgage giants that buy most U.S. home loans.
In mid-August, Fannie and Freddie announced the fee would take effect Sept. 1 — and mortgage rates quickly soared. Within weeks, a federal regulator delayed the new charge until Dec. 1, and rates came back down.
Now, the new date is just weeks away. So, if you want to get one of today's record-low 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 your credit profile.
You may find you're an ace at comparison shopping — which is a handy talent that 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, though at a lower price.