According to the National Association of Realtors, homeownership has many advantages - such as tax benefits, value appreciation, predictable housing payments, freedom to make modifications, privacy, and community. Indeed, one of the most valuable benefits of homeownership is the financial stability and security it brings.
Many have effectively utilized their home as a vehicle to maximize their financial wellbeing – yet, far too many have not. A recent Zillow survey revealed that through April 2021, fewer than 25% of eligible homeowners refinanced their homes in the prior twelve months. Mortgage technology and real estate data provider Black Knight recently reported that over 11 million homeowners can still benefit from a refinance, saving them approximately $300 per month.
High Closing Costs
When I read that over 30% neglected to refinance their mortgage because of “high fees,” I was really disappointed. There is a big misnomer “out there” that it is too costly to refinance a mortgage. As anyone who has read my articles over the years knows, it is even possible to refinance a mortgage with absolutely no costs. Regardless, even for a few thousand dollars of bona-fide fees, it is very easy to determine a break-even point. The notion of loan expenses should never be a deterrent for refinancing unless it genuinely doesn’t make sense.
I had a multiple-time repeat client who kept chasing me to refinance him as rates went down during Covid. Each time, I ran the numbers diligently and kept explaining to him that it really didn’t pay to refinance in his case, even though his current rate was much higher. He was at the point in his loan where he was mainly paying principal, and he didn’t need any cash-back. I am certain that if he called almost any other company, they would have gladly taken his application.
A third of those who didn’t refinance said it was because they were planning on paying off their mortgage “soon.” Some said they ‘might’ be moving shortly, and others said they might be paying down some loan principal, so it didn’t pay to mess with their current loan. Again, to these explanations, I cannot help but wonder what the logic is. If one is planning to move, whether it be an upgrade or a downgrade, a qualified mortgage professional is a great person to speak with to strategize about current and future loan options. I don’t know of a financial planner who is not suggesting that every carry some mortgage at these low rates. Paying down principal without any penalty can be done with any of my mortgages, so that should never be a deterrent!
Don’t Understand The Process
Finally, over 20% of those polled said they never attempted a refinance because they don’t understand the process. The entire existence of companies such as Approved Funding (and plenty others as well) is to remove the bureaucracy in banking. Unfortunately, so many people are traumatized by a mortgage experience from decades ago or a horrible purchase transaction, that they fret the process or don’t even bother researching alternative options. It costs nothing to make a few phones and get comfortable with someone who can help you at your tempo.
What do you lose by trying? Almost half (45%) of the people surveyed saved close to $300 per month; About 29% of those who refinanced saved between $300-500 per month, while 18% saved more than $500 per month. Approximately 8% did not see any monthly savings at all – call me to find out why!
Shout out and happy birthday to Amir Brandwein, Scott Chudnoff, Ezra Frazer, Dovey Forman, Elie Y. Katz, Talia Pollak, Karen Remer, Rabbi Yehuda Rosenbaum, Yechiel Rotblat, Sara Schreiber, Bonnie Silfen, Miriam Tennenbaum, and Ruth Wiseman.
Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Approved funding is a mortgage company offering competitive interest rates as well as specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at [email protected]