Homeowners Who Haven’t Refinanced Stand to Lose Thousands

According to a recently published Zillow report, mortgage rates are still hovering at all-time lows. This means that those homeowners who have not yet taken the plunge and refinanced their mortgages are missing out on big savings. Zillow points to these potential savings as being in the thousands.

Specifically, Zillow reports that the average monthly mortgage payment for a typical American home (one that was worth $256, 663 during August) would be $951 (this before taxes or insurance) when paired with a 3.75% mortgage rate (which is what the going rate was about a year ago at this time). Fast forward to now, with the current mortgage rate hovering a 3.02%, and that estimated monthly payment drops significantly, down to $868.

When all is said and done, Zillow breaks this down to reveal nearly $1,000 in savings. Zillow further reveals that throughout the lifetime of a 30-year loan on this same hypothetical, average American home, the difference in costs accrued and paid between the (former) 3.75% rate and the current going rate of 3.02% end up at an impressive $29,880.

Much of why today’s mortgage rates have remained at historic lows for all this time is due to the direct effect that the coronavirus pandemic had on the U.S. economy. In response to the pandemic’s “pinch” on the nation’s residents, the Federal Reserve lowered interest rates to near 0% in March. And they are still showing no sign of raising them anytime soon. Hence, bottoming out mortgage rates.

Zillow economist Matthew Speakman offered his professional insight on the current market, specifically regarding what’s happening with a rise in refinancing: “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. 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."