by Maurie Backman | Updated July 19, 2021 - First published on Nov. 5, 2020
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How's that for a nice chunk of savings?
Mortgage rates are extremely low for new home purchases, but those looking to refinance can get in on the action as well. Refinance rates have been trending slightly above purchase mortgage rates, but existing borrowers can still reap savings -- $5.6 billion worth per month, to be precise. In fact, the average mortgage refinance candidate could save $304 a month by refinancing now, according to Black Knight.
When we break that down further, we learn that over 7 million homeowners might shave over $300 a month off of their mortgage costs, while 2.5 million have the potential to save $500 or more. So if you haven't thought about refinancing your mortgage, it could pay to call some lenders and find out what offers you're eligible for.
Secure access to The Ascent's free guide that reveals how to get the lowest mortgage rate for your new home purchase or when refinancing. Rates are still at multi-decade lows so take action today to avoid missing out.
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When you refinance a mortgage, you swap your existing home loan for a new one. You might get a lower rate that could, in turn, lower your monthly payment. But refinancing isn't the right move for everyone. For refinancing to make sense, you'll need to check these boxes:
The typical homeowner could save $304 a month by refinancing, but your savings may amount to more or less. Use this mortgage calculator to get a feel for your own circumstances. Let's say you have 20 years left on a $200,000 mortgage with a 4% interest rate. If you're able to lower your mortgage interest rate to 2.85%, which is roughly what a 20-year refinance is averaging now, you'll shave about $117 a month off of your loan payments.
You may be thinking "What happened to my $304 a month in savings?" Again, it depends on your loan amount and the current rate you're paying. That's why it helps to run the numbers.
Refinancing a mortgage today won't make sense for everyone, but it could be a smart move for you. Do some number-crunching to see what your personal savings could amount to. From there, reach out to different refinance lenders to see what rates they can offer. The more quotes you gather, the more likely you'll be to eke out a good deal.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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