Millions of American mortgage borrowers have been told they could save more than $300 a month on their home loan payments by refinancing their mortgage to a new lower rate deal. With mortgage rates remaining at or near to record lows, Black Knight has calculated that some 18.5 million homeowners could reduce their interest rate by at least 0.75% if they were to approach the best refinance mortgage companies (opens in new tab).
As a result, the data (opens in new tab) suggests that over seven million homeowners could save more than $300 a month on their mortgage payments at current rates, while some 2.5 million borrowers could save a staggering $500 per month or more. According to Freddie Mac, 30-year fixed mortgage rates set yet another record low on October 22, the 11th such record this year.
“Mortgage rates remain very low, providing homeowners who have not already taken advantage of this environment ample opportunity to do so,” said (opens in new tab) Sam Khater, Freddie Mac’s Chief Economist. “Mortgage rates today are on average more than a full percentage point lower than rates over the last five years. This means that most low- and moderate-income borrowers who purchased during the last few years stand to benefit by exploring refinancing to lower their monthly payment.”
New buyers make their move too
At the same time, Black Knight said new home buyers had also been making the most of the favorable interest rate environment. Indeed, the expectation is that purchase lending across 2020 as a whole will reach its highest level since 2005. Despite the severe pandemic-related headwinds seen earlier in the year, the report noted that the housing market overall, including home price appreciation, had remained “remarkably robust”.
“The annual home price growth rate had slowed to 0% in May – the first time home prices were flat year-over-year since early 2012 – but have since skyrocketed, driven by record low rates, improved affordability and a severe shortage of available inventory,” said Black Knight Data & Analytics President Ben Graboske. “We are seeing record numbers of originations as well, as homebuyers continue to compete for limited inventory in a unique market that favors larger homes in less dense areas.”
How to take advantage of low mortgage rates
Whether you’re making plans to soon buy your first home, or already a homeowner hoping to save money on your current mortgage, finding the best mortgage lenders (opens in new tab) is a must.
If you’re unsure where to begin, or deterred by the thought of trawling mortgage company websites, the best way to track down the mortgages that are available to you is using an online marketplace, like LendingTree (opens in new tab). As long as you can find the time to share your details and borrowing requirements once, the lenders on its panel will then start coming to you with what they are willing to offer in respect of interest rates and wider mortgage terms. Once you have a number of quotes to hand, you’ll need to compare them against your existing mortgage deal, and with each other, to establish if you would indeed be better off switching mortgages or if you’re in a position to finally make the offer on that new home.
If you find a mortgage that suits you, getting yourself in the best position to make the final application is then key. This means locating all the documentation relevant to your existing mortgage, and gathering the papers and proof that lenders always like to have sight of before approving any mortgage - this will include recent payslips, your employment details, copies of your filed taxes (opens in new tab), and statements showing how much you have saved and invested, and what you might owe on credit cards (opens in new tab), personal loans (opens in new tab), and so on.
While the increased use of appraisal waivers (opens in new tab) is helping to smooth the path of refinance mortgage borrowers, it’s worth noting that the economic downturn has seen most lenders display slightly more caution than usual over lending decisions. With this in mind, it’s definitely worth reviewing your credit rating, and maybe even approaching the best credit repair services (opens in new tab), to make yourself look as attractive to a mortgage company as you possibly can.