Have you taken advantage of the historically low mortgage rates over the last few years? No? Well you aren’t alone, according to a new report. As mortgage rates stand, more than 5 million borrowers could qualify and benefit from a mortgage refinance.
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Big, Big Savings
According to a report from Black Knight Financial Services, about 2.4 million borrowers could save $200+ on their monthly mortgage payments and an additional 1.9 million could save $100-$200 per month as mortgage rates stand right now. If you add up those savings, that amounts to $1.2 billion in interest.
A Bump in Rates Could Shut Out Borrowers Wanting to Refinance
When this report was published, the average rate on a 30-year fixed mortgage was just below 4 percent, but Ben Graboske, senior vice president at Black Night Data & Analytics, said if rates go up 50 basis points (0.50%), 2.1 million borrowers will miss out on savings. Another 100 basis point (1.0%) increase and 1 million more would fall out of the running.
While many homebuyers and homeowners have fretted over the increase of the federal funds rate, mortgage rates aren’t directly impacted. But as the economy and labor market improves, many economists are predicting a rise in rates for 2016.
According to Black Knight’s data, homeowners wanting to refinance should do so sooner than later as Freddie Mac’s chief economist expects that 30-year fixed-rate mortgage to average somewhere near 4.5% for 2016, which would shut many homeowners out of the refi market.
You’re Likely Underestimating Your Home Equity
Rising home values also opened up a significant amount of equity for homeowners in 2015, around $600 billion to be exact. Collectively, U.S. homeowners have approximately $4.2 trillion in available home equity.
But a 2015 report found that many homeowners underestimate the amount of equity they have in their homes. Only 37 percent of mortgage homeowners believe they had at least 20% equity in their homes, but Fannie Mae estimates at least 69 percent of those homeowners have 20% or more equity in their homes.
Fannie Mae refers to this as a “negative perception gap” and is keeping many homeowners from advancing financially with their home equity.
If you’re interested in refinancing while interest rates are still near record lows, download our free Refinancing Guide and contact one of our mortgage bankers to discuss your options.