Despite Record Low Rates, Most Homeowners Pass on Refinancing
A Zillow survey of more than 1,300 homeowners found despite record low interest rates, more than three-fourths of respondents passed up the opportunity to refinance their mortgage.
The survey, conducted in April, reported just 22 percent of homeowners refinanced their mortgage over the past 12 months. Those who did said they saved $300 or more per month on average, which went toward home renovations or paying off debt.
The majority or respondents cited the complexity of purchasing or refinancing a home or not understanding the process as major reasons for not pursuing refinancing options. 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.
Mortgage rates have trended down since winter of 2018, and 30-year fixed rates dropped from 3.13% about a year ago to a record low 2.65% in January, according to the Freddie Mac Primary Mortgage Market Surve. The Mortgage Bankers Association this week reported the 30-year fixed rate at 3.18%.
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.”
The survey said nearly nine in 10 (89%) homeowners who refinanced in the past year said low interest rates were a reason they refinanced, and nearly three in four (74%) refinanced to reduce monthly expenses. One-third of homeowners who refinanced did so to pay off debt.
The survey said 29% of those who refinanced saved $300-500 per month, while 18% saved more than $500 per month. Nearly half (45%) saved less than $300 per month, while the remaining 8% did not see a monthly savings.