SEATTLE, Sept. 29, 2020 /PRNewswire/ -- Mortgage
rates are holding steady near historic lows1,
and homeowners who haven't refinanced could be tossing thousands of
dollars out the window.
The monthly mortgage payment on the typical U.S. home, worth
$256,663 in August, would be
$951 before taxes or insurance with a
3.75% mortgage rate, near where rates were a year ago. But with a
3.02% rate2, that monthly payment drops to
$868, which adds up to nearly
$1,000 per year in savings. Over the
lifetime of a 30-year loan on that same home, the difference
between a 3.75% rate and a 3.02% rate comes out to $29,880.
As the coronavirus pandemic has impacted the U.S. economy, one
effect has been persistently low interest rates. The Federal
Reserve lowered interest rates to near 0% in March to help bolster
the national economy and shows no sign of raising them. As a
result, mortgage rates, which generally follow bond yields, have
lingered near historic lows.
"Choosing whether to refinance your mortgage is ultimately a
personal choice, but recent moves in mortgage rates have probably
made that decision a whole lot easier for those who qualify," said
Zillow economist Matthew Speakman.
"Mortgage rate declines have allowed many to lower their monthly
mortgage payment or tap into the equity they've built in their home
by refinancing their loan – offering some financial stability to
many in a time of great economic uncertainty. With rates poised to
stay relatively low for the immediate future, for many – including
those paying mortgage insurance – a refi could remain a worthwhile
endeavor."
Refinancing does come with additional fees that can range from
2% to 6% of the loan's principal3, so
homeowners who are planning to move within the next couple years
may not save enough on a monthly basis to offset those fees.
Since mortgage payments are based on the price of the home loan,
homeowners in pricier markets could see savings of hundreds of
dollars each month by refinancing to a lower mortgage rate. In the
San Francisco and San Jose metros, where the typical home is
worth more than $1 million, the
monthly savings from a 3.02% rate instead of a 3.75% rate is more
than $350.
Homeowners with smaller loans may not benefit as much from the
current low rates unless their current rate is significantly
higher. For example, in Memphis,
Tenn. and Oklahoma City,
the difference in monthly mortgage payments on the typical home
with a 3.75% mortgage rate and 3.02% mortgage rate is only
$53. Homeowners who are interested in
their potential savings from refinancing their mortgage can talk to
their lender or use Zillow's refinance calculator to see what
they could save.
Homeowners who are refinancing their mortgages currently make up
about 63% of mortgage activity, according to the Mortgage Bankers
Association4. Refinancing soon could save
borrowers more money than if they wait to refinance. Beginning in
December, Fannie Mae and Freddie Mac are planning to charge an
"adverse market fee" on most refinanced mortgages they purchase,
which the Mortgage Bankers Association estimates will cost about
$1,400 on the typical
loan5.
Home buyers are currently facing low inventory and climbing
prices. As low interest rates keep their monthly payments more
affordable, they may be able to stretch their dollar further,
giving them more options. Zillow's affordability
calculator can help buyers understand how much purchasing
power they have based on their income, down payment and mortgage
rate.
Metro
Area
|
Typical
Home
Value in
August
|
Monthly
Payment
with a 3.75%
Rate*
|
Monthly
Payment
with a 3.02%
Rate
|
Annual
Payment
with a
3.75% Rate
|
Annual
Payment
with a 3.02%
Rate
|
United
States
|
$256,663
|
$951
|
$868
|
$11,412
|
$10,416
|
New York,
NY
|
$493,579
|
$1,829
|
$1,669
|
$21,948
|
$20,028
|
Los Angeles-Long
Beach-Anaheim, CA
|
$706,714
|
$2,618
|
$2,390
|
$31,416
|
$28,680
|
Chicago,
IL
|
$246,357
|
$913
|
$833
|
$10,956
|
$9,996
|
Dallas-Fort Worth,
TX
|
$261,739
|
$970
|
$885
|
$11,640
|
$10,620
|
Philadelphia,
PA
|
$262,437
|
$972
|
$887
|
$11,664
|
$10,644
|
Houston,
TX
|
$222,936
|
$826
|
$754
|
$9,912
|
$9,048
|
Washington,
DC
|
$452,030
|
$1,675
|
$1,529
|
$20,100
|
$18,348
|
Miami-Fort
Lauderdale, FL
|
$310,471
|
$1,150
|
$1,050
|
$13,800
|
$12,600
|
Atlanta,
GA
|
$251,454
|
$932
|
$850
|
$11,184
|
$10,200
|
Boston, MA
|
$514,321
|
$1,906
|
$1,739
|
$22,872
|
$20,868
|
San Francisco,
CA
|
$1,127,066
|
$4,176
|
$3,811
|
$50,112
|
$45,732
|
Detroit,
MI
|
$188,420
|
$698
|
$637
|
$8,376
|
$7,644
|
Riverside,
CA
|
$400,664
|
$1,484
|
$1,355
|
$17,808
|
$16,260
|
Phoenix,
AZ
|
$312,317
|
$1,157
|
$1,056
|
$13,884
|
$12,672
|
Seattle,
WA
|
$559,226
|
$2,072
|
$1,891
|
$24,864
|
$22,692
|
Minneapolis-St Paul,
MN
|
$305,202
|
$1,131
|
$1,032
|
$13,572
|
$12,384
|
San Diego,
CA
|
$643,903
|
$2,386
|
$2,177
|
$28,632
|
$26,124
|
St. Louis,
MO
|
$187,795
|
$696
|
$635
|
$8,352
|
$7,620
|
Tampa, FL
|
$242,924
|
$900
|
$821
|
$10,800
|
$9,852
|
Baltimore,
MD
|
$302,464
|
$1,121
|
$1,023
|
$13,452
|
$12,276
|
Denver, CO
|
$458,600
|
$1,699
|
$1,551
|
$20,388
|
$18,612
|
Pittsburgh,
PA
|
$167,172
|
$619
|
$565
|
$7,428
|
$6,780
|
Portland,
OR
|
$429,608
|
$1,592
|
$1,453
|
$19,104
|
$17,436
|
Charlotte,
NC
|
$249,960
|
$926
|
$845
|
$11,112
|
$10,140
|
Sacramento,
CA
|
$444,733
|
$1,648
|
$1,504
|
$19,776
|
$18,048
|
San Antonio,
TX
|
$211,964
|
$785
|
$717
|
$9,420
|
$8,604
|
Orlando,
FL
|
$266,005
|
$986
|
$899
|
$11,832
|
$10,788
|
Cincinnati,
OH
|
$197,135
|
$730
|
$667
|
$8,760
|
$8,004
|
Cleveland,
OH
|
$168,298
|
$624
|
$569
|
$7,488
|
$6,828
|
Kansas City,
MO
|
$214,639
|
$795
|
$726
|
$9,540
|
$8,712
|
Las Vegas,
NV
|
$302,071
|
$1,119
|
$1,021
|
$13,428
|
$12,252
|
Columbus,
OH
|
$222,467
|
$824
|
$752
|
$9,888
|
$9,024
|
Indianapolis,
IN
|
$192,677
|
$714
|
$652
|
$8,568
|
$7,824
|
San Jose,
CA
|
$1,224,366
|
$4,536
|
$4,140
|
$54,432
|
$49,680
|
Austin, TX
|
$357,346
|
$1,324
|
$1,208
|
$15,888
|
$14,496
|
Virginia Beach,
VA
|
$252,041
|
$934
|
$852
|
$11,208
|
$10,224
|
Nashville,
TN
|
$289,792
|
$1,074
|
$980
|
$12,888
|
$11,760
|
Providence,
RI
|
$333,191
|
$1,234
|
$1,127
|
$14,808
|
$13,524
|
Milwaukee,
WI
|
$212,166
|
$786
|
$717
|
$9,432
|
$8,604
|
Jacksonville,
FL
|
$240,785
|
$892
|
$814
|
$10,704
|
$9,768
|
Memphis,
TN
|
$164,254
|
$609
|
$555
|
$7,308
|
$6,660
|
Oklahoma City,
OK
|
$165,014
|
$611
|
$558
|
$7,332
|
$6,696
|
Louisville-Jefferson
County, KY
|
$189,706
|
$703
|
$641
|
$8,436
|
$7,692
|
Hartford,
CT
|
$246,821
|
$914
|
$835
|
$10,968
|
$10,020
|
Richmond,
VA
|
$256,417
|
$950
|
$867
|
$11,400
|
$10,404
|
New Orleans,
LA
|
$215,218
|
$797
|
$728
|
$9,564
|
$8,736
|
Buffalo,
NY
|
$183,071
|
$678
|
$619
|
$8,136
|
$7,428
|
Raleigh,
NC
|
$292,160
|
$1,082
|
$988
|
$12,984
|
$11,856
|
Birmingham,
AL
|
$174,875
|
$648
|
$591
|
$7,776
|
$7,092
|
Salt Lake City,
UT
|
$405,189
|
$1,501
|
$1,370
|
$18,012
|
$16,440
|
*Payments do not include taxes, insurance or HOA dues
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1 Based on data from Freddie Mac
http://www.freddiemac.com/pmms/
2 The average rate for a 30-year
fixed-rate mortgage for lenders quoting on Zillow on September 22, 2020
3 https://www.zillow.com/mortgage-learning/how-to-refinance/#h_2_3
4 https://www.mba.org/2020-press-releases/september/mortgage-applications-decrease-in-latest-mba-weekly-survey-x272310
5 https://www.cnn.com/2020/08/25/success/refinance-fee-freddie-mac-fannie-mae/index.html
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content:http://www.prnewswire.com/news-releases/homeowners-could-save-thousands-by-refinancing-their-mortgages-301139643.html
SOURCE Zillow