How much can you save?
Rates on 30-year fixed-rate mortgages are currently averaging a mere 2.72% according to the long-running survey from mortgage company Freddie Mac. That's nearly an entire percentage point lower than a year ago, when the average stood at 3.66%.
With rates so unbelievably low, some 19.4 million U.S. homeowners are ripe for a refinance and would see a substantial benefit, the mortgage technology and data provider Black Knight reported on Friday. That's about double the number of mortgage holders who had an incentive to refi at this time last year.
Together, the refinance candidates could save $5.98 billion monthly by refinancing — which works out to average savings per borrower of $309 a month.
Even better, Black Knight says 2.7 million of those homeowners could save $500 or more every month through a refinance. The firm says its estimates take into account the millions of homeowners who've already refinanced this year.
Who should be refinancing?
The final numbers for the third quarter of 2020 are likely to show refinancing hit a record over July, August and September, Black Knight has said. Separate research indicated that Americans this year have been eagerly refinancing at more than triple the rate of a year ago.
Want to join the refi rush? 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 pronto
Homeowners who could refinance and reap the savings may not have much 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.
The fee officially takes effect on Dec. 1. So, if you want to get one of today's record-low mortgage rates locked while you have the chance, start shopping around ASAP. Check rates from several lenders to find the best deal available for your area and your credit profile.
If you discover you're an ace at comparison shopping, put that talent to save on your homeowners insurance, too. 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.