Millions of American homeowners could save an average of $289 per month by switching to a new low rate mortgage deal offered by the best refinance mortgage companies. That is the message from Black Knight, whose latest research (opens in new tab) also reveals that record-low mortgage rates means that purchasing a home is at its most affordable since 2016.
The twin boost comes after the average cost of a 30-year mortgage dropped below 3% (opens in new tab) for the first time ever in mid-July. Despite edging slightly higher towards the end of the month, the research reveals that some 15.6 million homeowners still have a financial incentive to refinance their mortgage and move away from their existing mortgage deals.
Based on typical underwriting criteria, which includes borrowers being current on their mortgage, having a minimum credit score of 720, and having at least 20% equity in their homes, it is estimated that by refinancing such candidates could lower their 30-year interest rate by at least 0.75%, and save, on average, $289 per month on their mortgage payments.
If all such homeowners refinanced, combined savings on mortgage outgoings across the US would amount to more than $4.5B per month. It is money that could be used by those whose incomes have been impacted by the coronavirus for everyday spending or to pay down debt (opens in new tab), potentially helping to boost the economy too.
Purchasing power also rising
At the same time, the report found that low mortgage rates have left the cost of purchasing the average-priced home in the U.S. at its most affordable in three-and-a-half years. The buying power of those looking for a new home has increased 10% year-over-year, meaning buyers are able to afford almost $32,000 more home than a year ago for the same monthly payment.
While buyers in all of the 25 largest markets are seeing their strongest affordability in more than two years, six states - Louisiana, Arkansas, Iowa, West Virginia, Kentucky and Maryland - are seeing housing at its most affordable in more than 25 years.
“Despite eight consecutive years of rising home prices, July’s record-low mortgage rates have made purchasing the average-priced home for a median wage earner the most affordable since late 2016,” said Black Knight Data & Analytics President Ben Graboske. “Falling rates and improved affordability have helped to spur home-buying demand, and therefore purchase origination volume, which has provided a much-needed backstop for home prices in the wake of the COVID-19 pandemic.”
How can I make the most of low mortgage rates?
If you’re wondering whether you can save money on your existing mortgage, or want to take advantage of the improved affordability to buy a new home, finding the best refinance mortgage companies (opens in new tab) and mortgage lenders is key.
Importantly, if the prospect of researching the market is putting you off, remember that the easiest way to check the mortgage rates and terms available across a number of lenders quickly is to use a comparison site, such as LendingTree (opens in new tab). By sharing your personal details once, and giving an indication of the type of mortgage loan you want, your current mortgage balance, the value of your home, and so on, mortgage lenders from across the market will let you know what they are willing to offer you. Compare the quotes against your current mortgage deal, and each other, and you’ll quickly see whether you can save money on your monthly payments or afford to buy your new home.
When it comes to applying for your new mortgage, there are a number of things you’ll need to prepare as well. Dig out the paperwork that relates to your current mortgage and get all the other evidence that mortgage lenders will want to see in order too, including payslips, tax returns, and bank, personal loan and credit statements. Also take a quick look at your credit score, and consider signing up to the best credit repair services if it’s not in the best of shape. Lenders are taking extra care over who they lend to because of the pandemic, so making sure you present yourself in the best way possible is a must.