Zillow recently surveyed more than 1,300 homeowners, and found that fewer than a quarter of established homeowners refinanced their mortgages over the past 12 months.
While more than half (59%) of those surveyed have refinanced the mortgage on their current home at least once, with just 22% of respondents saying 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 Freddie Mac’s Primary Mortgage Market Survey (PMMS).
"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 nine in 10 (89%) homeowners who refinanced in the past year said low interest rates were a reason they refinanced, and 74% refinanced to reduce monthly expenses. Nearly a third of homeowners who refinanced did so to pay off debt.
In terms of monthly savings realized, 29% of those who refinanced saved $300-500 per month, while 18% saved more than $500 per month. Almost half (45%) found savings of less than $300 per month, while the remaining 8% did not see a monthly savings.
And for those who are simply not taking advantage of record-low rates in a prime refi environment, 37% reported that they were considering moving or paying off their mortgage soon, and 38% said the fees were too high. Nearly 29% of homeowners did not refinance because they reported that they don't understand the process.
"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."
Of those who have not refinanced recently, 41% of respondents said that they are quite likely, very likely, or absolutely certain to refinance, while another 28% said they are somewhat likely. Of this group, 49% think they will refinance in the next year.
Click here to read more on Zillow’s latest refi report.