You have probably already read the headlines touting how low mortgage interest rates are right now. Actually, it seems as though every time you look, rates are dropping even further. This has led many borrowers to refinance their mortgage to lock in these historically low interest rates. In fact, 75% of homeowners – or 19.3 million – could benefit from refinancing, according to data from Black Knight, a software and analytics firm for the mortgage and lending industry. That’s the largest number of potential refinance candidates ever on record, Black Knight says. According to Black Knight, the average homeowner could potentially reduce their mortgage payment by $299 a month. More than 7 million refinance candidates could save from $300 to $500 per month. Nearly 2.5 million homeowners could save $500 a month or more, the firm notes.
To refinance, borrowers will need to compile tax returns, bank statements, paychecks, and additional documents. But besides the tedious task of refinancing, many homeowners also may be leery due to interruptions in their incomes from disruptions to their job during the pandemic. Furthermore, they may even have lost their job entirely. Lastly, closing costs can add up, ranging from 2% to 5% of the amount of the loan.
In closing, refinancing does come with some costs & you will need to analyze if these costs are justifiable. In other words, you will want to determine what these costs are and how long it will take for the monthly savings to pay back these up front costs. Knowing how long you plan on staying in your current residence will also be a critical factor in your decision making process.