Nearly 18 million homeowners are potentially missing out on mortgage refinance savings, according to a recent report from Black Knight, a data analytics firm.
Mortgage rates have stayed near historic lows for the past few months, and refinance rates have bloomed as a result, thus, making now a great time to refinance your existing home loan. If you're wondering if you're a good mortgage refinance candidate, read on.
Should I refinance my mortgage?
Before deciding whether to refinance your home loan, you have to determine if you're a good candidate. Multi-lender marketplace Credible is a great place to start investigating mortgage refinance options. See what kind of rates you qualify for today with the click of a button.
According to the Black Knight report, the following mortgage details indicate that you might be one of the 18 million who can benefit from reevaluating your home loan options.
Reasons to refinance:
- You can cut your interest rate: If you can slash your current interest rates by at least 0.75% by refinancing, then you should consider a refinance. (For example, if your old interest rate was 3.75%, you would want to qualify for a new loan rate of at least 3.0%.)
- You have at least 20% home equity: You’ve paid down your home loan to 80% of your home’s value or less. (Read more about home equity needed for a refi here).
- You have a good credit score: You have or a FICO credit score of 700 or above.
If you meet these qualifications, visit Credible to speak an experienced loan officer about your current mortgage and see if a refinance saves money.
You can also use a mortgage refinance calculator to determine your total savings to get a sense of what your new monthly payments would be if you refinance your loan at a lower interest rate.
How to refinance your mortgage
If you've used your mortgage payment calculator and have decided you're a good candidate to refinance, the next step is learning how to get a mortgage refinance loan. Luckily, this process is fairly easy. All you need to do is follow the steps below:
- Compare refinance rates and lenders
- Gather your personal finance documents
- Apply for the loan
Compare refinance rates and lenders: If you want to take advantage of the savings from refinancing your mortgage, the first thing to do is to compare accounts of refinance lenders. Put simply, different refinance lenders may offer you different mortgage rates based on the strength of your financial profile and current loan. They may also have different cost structures, so you’ll want to gather as much information from them as you can, particularly about the costs of refinancing your original loan.
Using an online marketplace like Credible is a great way to compare your loan options with multiple refinance lenders without having to fill out a pile of paperwork.
Gather personal finance documents: Similarly to how you had to provide financial documents to your mortgage lender when you originally took out your home loan, you'll need to provide these documents again when you refinance. Once you choose which lender you're going with, it's best to ask them for a list of all the documentation that they’ll need from you.
Apply for the loan: When you're ready, go to your preferred lender and apply for the loan. This process mainly involves answering questions about your old loan and your current financial situation. Your lender may also ask you to lock in your interest rate at this time. After that, you'll be on your way to being approved for a new loan.
What are today’s mortgage rates?
At the time this article was published, the average rate for a 30-year, fixed-rate mortgage remained under 3% at just 2.9%, according to Freddie Mac. Meanwhile, the average rate for a 15-year, fixed-rate mortgage is 2.4%.
Using the rate for a 30-year, fixed-rate mortgage as a basis for comparison, today’s mortgage loan rates have dropped from a rate of 3.73% at this time last year. That is a massive drop, which can lead to massive savings for homeowners who choose to take advantage of these low loan rates.
If you're ready to save money with a lower rate, Credible can help you get pre-qualified for a new home loan without impacting your credit score.
Is now a good time to refinance your mortgage?
That said, if you're thinking of taking advantage of real estate’s lower rates, it's best to act quickly. In response to the wave of refinances that have taken place over the last few months, Fannie Mae and Freddie Mac have decided to impose a new 0.5% surcharge on mortgages over $125,000 that become part of their portfolio.
This fee was originally intended to have a September 1st start date, but mortgage rates soared in response to an outcry following the announcement. as a result, the fee was delayed until December 1, 2020, which means the clock is ticking for borrowers who want to refinance without having to worry about additional closing costs affecting your bottom line.
Check out Credible today to compare refinance lenders and your home loan options to see if you can save money.
If you need more mortgage details or information regarding reasons to refinance, consider reaching out to a financial advisor. You want to ensure you're locking in a lower interest rate in order to lower your monthly mortgage payment and save money in the long run.