Will more homeowners look to refinance?
Posted on Wednesday, November 12, 2014 at 8:31:51 AM
Over the past several weeks, residential financing rates have hovered near 4 percent. That is pretty good, and for many homeowners, that might be the motivation behind refinancing their mortgages.
According to Black Knight Financial Services, the lower rates mean that 1.4 million more borrowers are considered "refinancible." More than half of all borrowers have at least 30 percent equity in their properties as well, making refinancing more of a possibility.
"Before the most recent reductions in the average 30-year mortgage interest rate, approximately 6 million borrowers met broad-based 'refinancibility' criteria," explained Trey Barnes, BKFS senior vice president of Loan Data Products. "These criteria assume loan-to-value ratios of 80 percent or below, good credit, non-delinquent loan status and current interest rates high enough that borrowers have an incentive to refinance."
While refinancing is possible for many borrowers, it isn't right for everybody. The goal of this process is to acquire a lower interest rate, shorter loan term or different type of mortgage. However, there are costs up front, and these can make refinancing a bad idea for some people.
With that said, do the math to see if the initial expenses are worth the long-term benefits of a refinanced mortgage.