Fewer Than 1 in 5 With Pre-Pandemic Mortgages Have Refinanced
Despite record low interest rates, just 19 percent of homeowners with a mortgage they had prior to the pandemic have refinanced since COVID-19 started, according to Bankrate.com.
In fact, nearly 40 percent of homeowners with a mortgage do not know their current interest rate, making it impossible for them to know if they could benefit from refinancing, Bankrate found in a new survey.
Meanwhile, 47 percent of households with pre-pandemic mortgages have not even considered refinancing and 27 percent said they have considered refinancing but have not done it, the report said. Curiously, 7 percent of those surveyed said they do not know if they have refinanced or not.
“The overwhelming majority of mortgage borrowers have not yet refinanced, despite record low rates over the past year,” said Greg McBride, Bankrate.com Chief Financial Analyst. He said cutting a monthly mortgage payment by $150 or $250 of more can create valuable “breathing room” in the household budget at a time when many other costs are rising.
McBride noted the most often cited reason for not refinancing might not hold up in the current ultra-low-rate environment. “Reducing your payments with no out-of-pocket cash by rolling the costs into the loan are one way to trim the biggest household expense without compromising your savings account,” he said.
Of the households who have not yet refinanced, about one-third said they believe it would not save them enough money, 27 percent pointed to high closing costs/fees, 23 percent said there is too much paperwork involved, 14 percent plan to move or pay off the loan soon, 12 percent cited credit score issues, nine percent said they would not qualify due to unemployment or reduced income and 4 percent said they owe more than their home is worth.
Asked about the best reasons to tap into their home equity via a cash-out refinance, most mortgage holders cited home improvements or repairs (60 percent) and debt consolidation (44 percent). Other reasons included keeping up with regular household bills (19 percent), paying tuition or other education expenses (19 percent), other investments (16 percent) and vacations and/or big ticket non-essential items such as a boat (10 percent), Bankrate said.
Households with incomes of $50,000 or more are nearly twice as likely to have refinanced (24 percent) compared to those with household incomes below $50,000 (13 percent), Bankrate reported.