Many homeowners who wanted to refinance had opportunities to do so in recent years. But plenty still stand to benefit. At least 7.4 million homeowners with 30-year, fixed-rate loans can be refinanced, according to a report from mortgage analytics firm Black Knight Financial Services. That means they have at least 20 percent equity in their homes, good credit, a non-delinquent loan status and a rate greater than 4.5 percent, high enough to benefit from refinancing.
The pool could be even wider. Fannie Mae and Freddie Mac recently announced new programs allowing borrowers to put as little as 3 percent down. That could open the refinance market for homeowners who don’t have much equity and wouldn’t previously have been able to refinance.
The rule of thumb is that refinancing is worth it if you can drop your rate by at least one percent or otherwise cut a deal that lets you recoup the costs in money saved within a year or two. But there’s some flexibility in that assessment. The longer you plan to stay in your home, the less of a rate break there needs to be for you to benefit from refinancing.
If you do refinance, be smart about how you use those savings. “What else can you do with that money?” Before splurging, explore how you might be able to use it to improve your finances—for example, by maxing out your 401(k), paying off high-rate credit card debt or putting aside cash for college.
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