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How to Save Hundreds a Month on Mortgages: The Way Millions of Americans Are Missing

The coronavirus financial crisis made 2020 the year of record low mortgage rates, which are currently less than 3% for the average 30-year fixed rate home loan. MSN.

Photo: Shutterstock

Maybe you are now saying, "Yes, I know it was all over the news."

If so - and you are a homeowner with a mortgage - have you taken advantage of it? Today's low mortgage rates have made nearly 18 million mortgage holders good candidates for refinancing that could potentially save hundreds of dollars each month, according to a new report by mortgage data firm Black Knight.

Each new record low rate means there are more and more old mortgages to refinance at lower interest rates, and chances are your existing loan is in that group.

The rates fall - opportunities open up

Rates on 30-year fixed-rate mortgages fell to an average of 2,99% at the end of July, according to mortgage giant Freddie Mac, which has been conducting weekly rate studies since 1971. This is just a notch above the historic low of 2,98% reached in mid-July 2004.

Current ultra-low rates are giving 17,8 million homeowners an incentive to refinance their higher-rate home loans and cut their monthly mortgage payments by an average of $ 287.

On the subject: Is it worth refinancing a mortgage during a pandemic: expert advice

Combined, all of these mortgage holders could cut interest costs by $ 5,1 billion a month in what the Black Knight calls "significant potential economic boost" amid the COVID-19 recession.

You are considered a good candidate for refinancing if you can cut at least three-quarters of a point - 0,75 - from your current 30-year mortgage rate. This means, for example, refinancing from a mortgage at 3,90% for a loan with a rate of 3,15% or higher.

You also need to be a good payer, which can be challenging for some borrowers during a pandemic. As unemployment soared in the United States, millions of Americans have suspended mortgage payments, demanding creditors to defer payments due to financial difficulties.

Other important factors to consider before applying for a mortgage for refinancing: You will need a credit rating of 720 or higher, and at least 20% of the equity must be invested in your home.

Don't bet on the possibility of lower rates

Despite the almost incredibly low mortgage rates and their financial benefits for homeowners, not everyone refinances loans. The latest report from the Mortgage Bankers' Association showed that the number of applications fell by 0,4% in the week ending July 24.

“There may be a lot of borrowers who have already refinanced or are waiting for rates to be even lower,” said Joel Kahn, deputy vice president of forecasting at a trade group recently.

But it is common knowledge that mortgage rates are impossible to predict and you may find yourself waiting for lower rates that never will. Interest rates are falling as financial markets are shaken by fears that the state of the US economy and the statistics on the incidence of coronavirus infection may worsen.

"If there is important positive news in any of these areas, mortgage rates are likely to rise, possibly quickly," said Matthew Speakman, an economist at Zillow.

On the subject: 7 US cities where it is most profitable to refinance a mortgage

Therefore, experts say that you should not risk losing an attractive rate and saving hundreds of dollars, which is available right now. Research refinancing offers from multiple lenders - and act when you find something that works for you. Different lenders may offer a wide variety of mortgage rates, so research is important.

It also works well when it comes time to renew your homeowner's insurance. You can easily go online, get multiple home insurance offers, and find a policy that offers the best coverage at the right price.

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