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The average interest rate on home mortgage loans fell to another record low last week, hitting the lowest level in close to 50 years of tracking. As mortgage rates have continued to drop, the number of people who could benefit from refinancing has increased.
In total, qualified homeowners could save $5.98 billion a month by refinancing, which is the largest amount in recorded history.
As many as 19.4 million homeowners could benefit from refinancing
Black Knight reports that 19.4 million homeowners are "high-quality" refinance candidates.
To qualify as a "high-quality" candidate, homeowners need to have a credit score of at least 720, have 20% equity in their home, and be able to reduce their current mortgage rate by at least 0.75% through refinancing.
According to the mortgage analytics company, the 19.4 million people who meet this criteria is the largest number of high-quality candidates on record. And the savings these homeowners could realize isn't a small amount either. In fact, they could save $309 per month or $3,708 per year on average.
Of course, these are just averages -- and some could do even better. Black Knight's data suggests that around 4.5 million borrowers could realize savings of $400 per month or more by refinancing right now. And 2.7 million of them could cut their monthly mortgage bill by more than $500.
Unsurprisingly, homeowners in places where property values tend to be higher are the most likely to save. There are more than 3 million high-quality refinance candidates in California alone, and residents of the Golden State could shave an average of $420 from their monthly bills. Florida is home to 1.4 million high-quality refinance candidates, followed by Texas with 1.3 million and New York with 1.1 million.
Less-qualified candidates can still save money
Of course, borrowers with lower credit scores or less equity may still be able to take advantage of today's record-low mortgage rates. They may have a harder time getting approved and may not qualify for absolute rock-bottom rates. But current mortgage rates are lower than anyone ever expected. High-quality candidates stand to save the most by refinancing, but few people's mortgage rates are as low as those available today.
As a result, any homeowner who hasn't refinanced recently and is in a financial position to do so should compare rates and terms from several different mortgage refinance lenders. Getting quotes won't affect your credit score, so see how a new loan might compare with your current debt.
Now, you will have to pay closing costs to refinance on a home loan. As such, it's important to do the math to see how long it will take for your interest savings to cover any up-front fees. If you're in a position to refinance and plan to stay in your home long enough to break even, there's little reason not to. You could end up with more money in your pocket each month.
