It has never been easier to refinance a home mortgage, yet 74% of homeowners haven’t refinanced since the coronavirus pandemic began.
Mortgage refinancing rates have been historically low since the beginning of the pandemic. Refinancing a mortgage is a sure way for homeowners to reduce monthly payments and ultimately save more money. Why then are so many electing not to refinance?
“Despite the fact that rates are once again hovering around all-time historic lows, many people have been lulled into complacency because of low rates over the past few years. This is unfortunate as many will miss out on one last chance to refinance and save money, as interest rates may very well move higher,” says Jason Wooten of First Rate Financial.
According to a recent study, the top three reasons that people cite for not refinancing are (1) they wouldn’t save enough money, (2) closing costs are too high, and (3) there is too much paperwork.
Here are three ways to overcome these hesitations:
1. Save money in the long run: To be sure, many homeowners have already refinanced and aren’t interested in doing it again. Call it “refinance fatigue.” Also, some believe refinancing wouldn’t be worth the expense: 32% don’t see the math adding up.
But earlier this year, one study found that at a 30-year fixed rate of 2.88%, close to 17 million homeowners could save an aggregate of more than $5 billion — just over $300 a month per homeowner.
Said Pat Fox, a senior loan consultant for Caliber Home Loans: “Most people don’t understand the math. They only look at the rate. They don’t understand the real power of cumulative interest savings over time. When I speak to a client, I not only help them understand what the monthly savings will be and the break-even point, but I show them the saving in cumulative interest, which is where the real savings are.”
2. Recoup closing costs: About one-in-four homeowners believe that closing costs are too expensive. While these costs are something to consider, it’s also important to check the math. When you cut your rate, you’ll be saving money every month, so you’ll eventually recoup closing costs — and be in a better financial position for the long term.
You can shop around for the best possible terms and costs to make it worthwhile. There are always competing offers from different lenders, so it’s important to be aware of how those offers stack up against each other. For example, some lenders may offer low rates but charge higher fees.
3. Look for a good customer experience: If you have ever applied for a mortgage, or even just looked at a new mortgage product online, you probably noticed there are a lot of steps involved. Whether it’s choosing your lender from a list or determining how much your loan will be, there’s a lot to take in.
It’s important to seek out a firm that has a streamlined and easy customer experience. Look for things like digital verification of bank statements, so the paperwork process can be smoother. Also try to find a provider that provides customer service by phone and on its website, so there are multiple ways to connect. Just like in any other industry, good mortgage providers treat their customers with respect and dignity. They make you feel important and are with you at every step of the refinancing process.
Sanjiv Das is CEO of Caliber Home Loans.