A refinance involves taking out a new loan to replace an existing one, often with improved terms. This can help homeowners save money by reducing their monthly payments, lowering their interest rates and increasing their home equity. It can also help them pay off their loans faster or tap into their equity for other purposes.
Many homeowners have been able to take advantage of historically low mortgage rates in recent years. The average rate for a 30-year fixed mortgage is currently around 3 percent, the lowest it’s been since the 1970s. As a result, refinancing has become more attractive to many borrowers. In fact, the Mortgage Bankers Association (MBA) recently reported that 7 million borrowers in the US are now eligible to refinance and could save an average of $267 on their monthly payments.
However, there are several factors that could affect the availability of refinancing for these borrowers. Mortgage rates are expected to start rising soon, which could make it more expensive for borrowers to refinance. Similarly, lenders may start tightening their standards as the economy recovers from the impacts of the pandemic. This could make it harder for borrowers to qualify for a refinance, even if they do have high credit scores and plenty of equity in their homes.
It’s also important to remember that each borrower’s financial situation is unique. Homeowners should consider all of their options before deciding whether or not to refinance. This includes evaluating their current loan’s terms and considering their long-term goals. They should also calculate how much they could save if they do decide to refinance.
In summary, about 7 million American homeowners may benefit from refinancing their mortgages in order to save money. However, this number could decrease if mortgage rates rise or lenders start tightening their standards. Each homeowner should evaluate their individual situation to determine whether a refinance is the right option for them. They should also do the math to determine how much they could save in the long run.
This article was contributed on Nov 08, 2023
