PHOENIX (3TV/CBS 5) -- A new Bankrate study shows less than one in five homeowners with pre-pandemic mortgages have refinanced despite record low rates.
“One of the troubling things that we found was that 38% of mortgage borrowers don't even know their mortgage rate and that's really the first step in assessing whether or not you're a good candidate to refinance,” Greg McBride, Bankrate Chief Financial Analyst, said.
The report also found that number was even higher for younger people. 54% of millennial homeowners (ages 25-40) in the study didn't know their current interest rate. If you don't know your rate, you likely don't know if you could benefit from refinancing.
“Look no further than your monthly statement or call the company you make your payments with to find out what your current rate is, with the ability to now snag rates well below the 3% mark, there's substantial savings available,” McBride said.
According to the Bankrate study, the average homeowner could save $150-$200 each month or more.
“Refinancing your mortgage from say 4% to 3% on a $300,000 loan that saves you $167 a month, that's $2,000 a year in savings, that's going to create a lot of breathing room to absorb the increases you're seeing in other costs, I mean that can amount to a pay raise for many people,” McBride said.
The study found about half of mortgage borrowers haven't even thought about refinancing.
“If you've had your mortgage since prior to the pandemic, there's a real good chance that you're in the refinancing zone that you could benefit by refinancing given the sharp drop in interest rates,” McBride said. The survey also found people don't want to go through with the refinancing process because of the fees, paperwork, and hassle.
“Most refinances are not having to pay those fees out of pocket, they're able to roll that into their loan balance,” McBride said.
McBride said there’s a few reasons when you shouldn’t refinance. Those include if you plan to move in a couple years or have a low balance on your loan.
“The whole idea of refinancing is to reduce your interest charge so if your balance is really small, you're not paying a whole lot of interest on that and a lot of lenders won't touch those smaller balance loans,” McBride said.
If you want to crunch the numbers, click here to be directed to Bankrate’s Mortgage Refinance Calculator to find out how much you potentially save or lose.