Updated: Jul 9
According to data released this week, the 30-year fixed-rate average sank to 3.03 percent, the lowest percent on record in 50 years.
In March, it was estimated that 13 million borrowers could save money by refinancing their home loans and lowering their rates by at least .75 percent. This data came from Black Knight, a mortgage data and analytics company. That is a record number of potential refinance candidates and a 60% jump from eligible candidates in 2019. The average borrower can save about $277 per month on a 30-year fixed loan. That’s like getting free utility bills every month. If all those borrowers refinanced, that would be a collective $3.5 billion on monthly savings. Woah.
The .75 percent measure is just an average and can move in either direction for savings, depending on the borrower’s individual situation. If rates dropped just 4 basis points more from here, another 1.7 million borrowers would fall into that pool of potential savings. If rates continue to decrease, the number of eligible candidates could grow exponentially and an estimated 17 million of them can benefit from refinancing. To get a better idea on savings, Princeton Mortgage offers a free public calculator.
On the back of these lower rates, overall loan applications and refinances continue to climb, with refinance activities 176 percent higher than last year.
"Purchase applications continued their recent ascent, increasing 5 percent last week and 18 percent compared to a year ago. The pent-up demand from homebuyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.
Additionally, the purchase loan amount has increased steadily in recent weeks and is now at its highest level since mid-March.
While most borrowers are doing straight refinances to lower rates, some are doing cash-out refinances. Homeowners today have a record amount of tappable equity in their homes that they could collect by doing a cash-out refinance. Tappable equity is basically the amount of cash you can pull out of your home while keeping at least a 20 percent ownership stake in it. It is the difference of what your home is valued at compared to what you owe. In a cash-out refinance, the new mortgage loan is for a larger amount than the existing mortgage loan, and you the borrower gets the difference between the two loans in cash. About 45 million borrowers have tappable equity, representing $6.2 trillion collectively at the end of last year. A short conversation with a Princeton Mortgage loan originator could answer any questions you have regarding tappable equity and if you could benefit from a cash-out refinance.
As the housing market is continuing its path to recovery with record-low mortgage rates, refinancing now could benefit millions. When a borrower refinances a mortgage, they are paying off one loan with the proceeds of a new loan with more favorable terms, which generally means a lower interest rate. That, in turn, could lower monthly payments, making them more affordable. Or in the case of a cash-out refinance, borrowers are able to turn the equity they’ve built up in their home into straight cash. For many it can be an opportunity to pay off debt, pay college tuition, complete a renovation project, or finally be able to install that inground pool to create their personal backyard oasis. Sounds good, right?
As much as this seems like a no brainer, there are other factors to consider when deciding if refinancing is the right choice and each option has its pros and cons depending on long-term goals. Chances are that mortgage rates won't continue to remain this low for much longer. It’s worth talking to Princeton Mortgage to see what options there are for refinancing and we would love to help! Find out now by calling 800.635.0977 or visiting princetonmortgage.com to learn more.