SEATTLE, June 23, 2021 /PRNewswire/ -- Fewer than a
quarter of established homeowners refinanced their mortgages over
the last year, even though about half of those who did say they cut
their monthly payments by at least $300. Those savings often went toward home
renovations or paying off debt.
Zillow® surveyed more than 1,300 homeowners who did not move
over the past year (as of late April) to find out what motivated
those who did refinance their mortgages, how much they saved by
doing so, and what's holding the rest back.
While more than half (59%) of those surveyed have refinanced the
mortgage on their current home at least once, just 22% of
respondents said they did so within the past year. Mortgage rates
have trended down since winter of 2018, and 30-year fixed rates
dropped from 3.13% about a year ago to an all-time low of 2.65% in
January of this year, according to the Freddie Mac Primary Mortgage
Market Survey®, which analyzes residential mortgage rate averages
since 1971.
Though slightly above January's record lows, rates are
remarkably competitive -- 2.93% as of June
17.
Homeowners who have recently refinanced ranked the process as
less difficult than getting a divorce or following a strict new
diet, but significantly tougher than training a puppy.
"In general refinancing a mortgage should be a bit less intense
than a few weeks away at puppy boot camp," said Jonathan Lee, Zillow Home Loans Senior Director.
"A few hours of online shopping, talking to a mortgage professional
and signing documents is a small price to pay for hundreds of
dollars in potential savings per month, and goes a long way toward
funding those dog training classes."
Almost 9 in 10 (89%) homeowners who refinanced in the past year
said low interest rates were a reason they refinanced, and nearly 3
in 4 (74%) refinanced to reduce monthly expenses. About a third of
homeowners who refinanced did so to pay off debt.
In terms of monthly savings realized, about 29% of those who
refinanced saved $300-500 per month,
while 18% saved more than $500 per
month. Almost half (45%) saved less than $300 per month, while the remaining 8% did not
see a monthly savings.
When those who haven't refinanced recently were asked why, 37%
reported that they were considering moving or paying off their
mortgage soon, and 38% said fees were too high. About 29% of
homeowners did not refinance because they reported that they don't
understand the process.
A few simple steps can put homeowners on a path to take
advantage of today's low rates, Lee said. Homeowners should start
by considering their financial goals and needs, and then shopping
around to find a lender they feel comfortable with, though Lee said
shoppers should not be afraid to negotiate to try and reduce
out-of-pocket fees related to closing costs. Then just lock in a
rate and go through the normal processes of underwriting,
conducting an appraisal and closing.
Zillow's lender finding tool provides personalized mortgage
and refinance results along with lender ratings to help shoppers
search and connect with lenders that best fit their unique
needs.
Lee said one guideline consumers have followed in the past is
that if you can lower your rate by 1 percentage point or more, it
should make financial sense to refinance. However, rapid home
appreciation has brought that number down. Aside from talking to a
qualified mortgage professional, Zillow's refinance
calculator is an easy way to estimate monthly savings, fees
and break-even points.
"There are a lot of benefits to refinancing a home right now.
Reducing monthly mortgage payments is extremely popular. It can
boost borrowers' monthly cash flow by lowering the amount of
interest being paid on their loan," Lee said. "Fast-rising
home values also make cash-out refinances a great option, allowing
homeowners to tap into the increased equity of their home and
reinvest their savings in other areas, like paying down
high-interest debt, funding tuition or completing a home
improvement project."
For would-be home shoppers stymied by intense competition in a
red-hot housing market, a cash-out refinance to fund summer home
improvement projects could scratch the itch for improved
livability -- and higher eventual resale value -- on their current
home. Record home appreciation over the last year means owners
now have more equity to draw from.
A few things customers can do ahead of time to ensure a smooth
process is to gather the documents they need to verify personal
income, assets and financial history. Checking your credit score
and waiting to make any major purchases until after closing are
both good ideas too, Lee said.
Of those who have not refinanced recently, about 2 in 5 survey
respondents (41%) said that they are quite likely, very likely, or
absolutely certain to refinance, while another 28% said they are
somewhat likely. Of this group, almost half (49%) think they will
refinance in the next year.
Methodology
ZG Population Science surveyed 1,359
homeowners with a mortgage who did not move in the last 12 months
in the second half of April 2021. An
additional 242 homeowners who refinanced within the last year were
also interviewed to increase the ability to make statistical
comparisons. The survey measures why household decision makers did
or did not refinance, barriers to refinancing, and uses of savings.
To ensure national representativeness, quota sampling and
statistical weighting methods were used. The main sample of
homeowners was weighted to the 2019 American Community Survey, and
the oversample of homeowners who refinanced was weighted to the
2018 Zillow Consumer Housing Trend Report (CHTR).
About Zillow Group
Zillow Group, Inc.
(NASDAQ: Z and ZG) is reimagining real estate to make it easier to
unlock life's next chapter.
As the most-visited real estate website in the United States, Zillow® and its affiliates
offer customers an on-demand experience for selling, buying,
renting or financing with transparency and nearly seamless
end-to-end service. Zillow Offers® buys and sells homes directly in
dozens of markets across the country, allowing sellers control over
their timeline. Zillow Home Loans™, our affiliate lender, provides
our customers with an easy option to get pre-approved and secure
financing for their next home purchase. Zillow recently launched
Zillow Homes, Inc., a licensed brokerage entity, to streamline
Zillow Offers transactions.
Zillow Group's brands, affiliates and subsidiaries include
Zillow®, Zillow Offers®, Zillow Premier Agent®, Zillow Home Loans™,
Zillow Closing Services™, Zillow Homes, Inc., Trulia®, Out East®,
StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal
Housing Lender, NMLS #10287
(www.nmlsconsumeraccess.org).
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SOURCE Zillow