According to a recent report by Bankrate.com, less than 1 in 5, or about 19 percent of homeowners with pre-pandemic mortgages have refinanced.
Almost half, around 47%, with pre-pandemic mortgages still need to consider refinancing, while more than a quarter, around 27%, have considered refinancing but have not yet refinanced. In addition, 7% do not know whether or not they have refinanced their mortgage.
“The overwhelming majority of mortgage borrowers have not yet refinanced despite record low interest rates last year,” said Bankrate.com boss financially Analyst Greg McBride, CFA.
The top reasons homeowners didn’t refinance were 32% thought they weren’t saving enough money, 27% say there are too many closing fees and costs, and 23% say there is too much paperwork and hassle.
Even so, “cutting your monthly mortgage payment by $ 150 or $ 250, possibly more, can give the household budget valuable breathing space at a time when so many other costs are rising,” McBride said.
Other reasons given were plans to move or repay loan soon, credit problems unqualified due to unemployment or reduced income due to more than theirs homeland worth, and finally, not knowing the reason they didn’t refinance.
“The most common reasons for not refinancing may not hold up in this ultra-low interest rate environment,” continued McBride. “Cutting back on your cash out payments by adding the cost to the loan is one way to cut down on major household expenses without putting your savings account at risk.”
Hence, homeowners are encouraged to consider refinancing if they haven’t already, especially with the current low interest rates, but this has become a challenge, especially for homeowners who don’t even know their current interest rate.
The report found that 38% of homeowners, including 54% of Millennials, with a mortgage do not know their current interest rate and therefore do not know whether or not they could benefit from a refinance.
About 46% of total borrowers who have an interest rate of 3 percent or more are likely good candidates for lower interest refinancing.
To determine whether a refinancing would prove beneficial, Bankrate provides an example. For example, a 30 year $ 300,000 4% loan would cost $ 1,432 per month. Refinancing to 3% would bring the monthly cost down to $ 1,265, reducing your monthly payment by $ 167 or your yearly payment by $ 2,004.
Interestingly, the report found that 21% of millennials believe that vacations and big, non-essential items are good reasons to run their home equity. Compared to Gen X and Baby Boomers, Millennials are also more likely to see home equity as a way to keep up with household bills and make other investments.
Even so, about 28% of millennials refinanced themselves with pre-pandemic mortgages during the pandemic, more than Gen Z and Baby Boomers, where only 17% of both generations were.
Finally, the report showed that homeowners with incomes of $ 50,000 or more were also nearly twice as likely to refinance as homeowners with household incomes under $ 50,000.