About two-thirds of current mortgage applications are to refinance an existing mortgage and the Mortgage Bankers Association says that’s up more than 300% from a year ago.
A year ago, 30-year rates were pushing 5%. Freddie Mac’s weekly rate report now pegs the average rate for a 30-year loan at 3.68%, near the historic low set in late 2012, so it is no wonder mortgaged homeowners are refinancing.
Refinancing a mortgage is not free, but it may not be an out-of-pocket expense.
“Typically, there is about $1,500 in lender fees and about $2,500 in title work that needs to be paid for, so it can be somewhere around $4,000,” Corey Burr, at TTR Sotheby’s in Chevy Chase, Maryland, told WTOP.
“But many lenders wrap that into the new loan, so you really don’t have much out of pocket to get it done.”
Burr said homeowners who expect to stay put for even just two years would benefit financially by refinancing.
Property analytics firm Black Knight reports that homeowners who could currently benefit from refinancing could reduce their mortgage payments by an average $250 a month.
Black Knight estimates 10 million mortgaged homeowners could currently benefit by refinancing, based on being able to shave at least 0.75% off their existing mortgage rates.
Refinancing is not just as easy as calling the bank and asking for a better rate.
“Refinancing is basically re-qualifying for a new mortgage. The lenders want to make sure your debt situation and your income situation and your asset situation is strong enough so you can qualify for a new loan,” Burr said.
There are many free, simple mortgage calculators online, such as this one from Bankrate.com, that can give you a rough idea of how a lower rate might change your monthly mortgage payment.