For years, interest rates have been settled at historic lows, which have opened up opportunities for homeowners to refinance their home. The problem is homeowners are not taking advantage of these untouched savings.
There are approximately 6.68 million homeowners across America that could save a total of $20 billion annually.
A state-by-state analysis by NerdWallet using Black Knight Financial Services data found that California offers the most eligible candidates that have an incentive to refinance their home. These borrowers have a mean credit score <=720, a LTV <=80 percent, and a high enough current mortgage rate to be worth refinancing (75 basis points or higher than 3.65 percent), according to Kamran Rosen, a data analyst at NerdWallet.
According to the report, the number of borrowers who could both qualify and benefit from a refinance increased by a whopping 1.5 million—all since Jan. 1 of this year. This significant jump can mostly be attributed to the recent drop in interest rates, said Ben Graboske, data & analytics senior vice president at Black Knight.
“When Black Knight last looked at the refinanceable population just two months ago, there were 5.2 million potential candidates, and that number was on the decline,” Graboske said. “That analysis was shortly after the Federal Reserve raised its target rate by 25 basis points, at which time the prevailing wisdom was that mortgage interest rates would rise in response.”
Rates didn’t rise, however.
“Global economic shocks then sent investors looking for the safety of U.S. Treasuries, driving down yields on benchmark 10-year bonds,” Graboske said. “Mortgage interest rates began to fall in defiance of prevailing wisdom, and the refinanceable popular great by 30 percent in the first six weeks of 2016.”
In total, the report shows there are now 6.7 million borrowers who could qualify for a refinance and save an average of $3,000 per year. Broken down, 3.3 million of those borrowers could expect to save $200 or more per month, and another million could save as much as $400 or more per month.
NerdWallet identified the top 10 states with the most refinance targets:
- California (912,500 Refinance Targets)
- Texas (513,200 Refinance Targets)
- Florida (476,100 Refinance Targets)
- New York (396,300 Refinance Targets)
- Illinois (231,800 Refinance Targets)
- Pennsylvania (225,900 Refinance Targets)
- Georgia (220,700 Refinance Targets)
- Washington (219,300 Refinance Targets)
- Virginia (213,000 Refinance Targets)
- North Carolina (204,400 Refinance Targets)