Refinancing a mortgage for a better interest rate can save you money, but make sure you’re aware of extra fees and other considerations.
Many homeowners with mortgages have considered refinancing at some point or another. Refinancing a mortgage essentially replaces your current mortgage with a new loan. It’s an especially enticing choice for people who want to decrease their interest rate, lower their monthly payments, pay off the loan faster, tap into home equity, or turn an adjustable-rate into a fixed-rate loan. But hold on. Just because rates are at historic lows doesn’t mean that refinancing is the right decision for everyone.
Once you’ve decided that refinancing is worth exploring, find a mortgage representative who can clarify all the financials and explain all your options. While you’re discussing this, it’s important to ask the right questions—and lots of them. Ready to refinance your home? Before you jump in and start the refinancing process, watch this brief video from the realtor.com YouTube channel.
This new Zillow analysis shows how the expectation of quickly growing home values and the potential for rising interest rates mean those who don’t delay will have more buying power.
Seattle, WA – Feb. 3, 2021 (PRNewswire) — With mortgage rates at historic lows and homes flying off the market in record time, many prospective home buyers may be contemplating whether to buy now or wait until the frenzy slows down a bit. But the market is poised to stay red hot for some time, and a new Zillow analysis shows how waiting might add hundreds of dollars to a monthly mortgage payment.
That growth stems from a unique combination of market conditions, including extremely low interest rates, a wave of millennials who are aging into peak home buying years, and people re-evaluating their housing needs in light of COVID-19 and newfound freedom to work remotely. The increased adoption of tech tools that speeds up searching and purchasing also contributes to the incredibly competitive market.
All of that might seem overwhelming for a buyer trying to compete for a new home, but this analysis shows why — for someone ready to buy now — it makes more sense to prepare smartly and dive in soon rather than wait and hope the market slows. The keys are the combination of home value growth and expected rising mortgage rates.
Today’s average mortgage rate1 is 2.68% for a 30-year fixed loan. Assuming that rate and a 20% down payment, the typical home in the U.S. would cost a buyer about $861 a month, plus taxes and insurance. But if home values rise 8% and interest rates climb to 3%, the monthly cost of that same house would be $969 a month. At 12% home value growth, the monthly payment jumps to $1,005. And if mortgage rates reach 3.5%, the costs grow even more. In more expensive markets, the difference is hundreds of dollars each month.
“The best time to buy a home should always be when it’s the right time for your family. However, home shoppers would be wise to gather as much information as possible and use it to make smart decisions that maximize their buying power,” said Zillow home trends expert Amanda Pendleton. “For someone ready to buy, jumping in sooner rather than later could mean a savings of hundreds of dollars a month. Or, more likely, it could mean having to make fewer tradeoffs to stay within budget.”
Zillow has tools like mortgage and refinance calculators that help buyers and homeowners estimate their monthly mortgage payments and understand how much home value growth and rates can impact buying power even in the short term. Those and a variety of other resources allow buyers and current homeowners to easily shop and compare the best mortgage options available to meet their unique needs.
The Cost to Refinancing Now Versus Later
For the same reasons, homeowners should consider refinancing soon, as well. A homeowner refinancing a typical U.S. home would pay $861 a month after refinancing at today’s average rate. If rates climb to 3%, it will cost an extra $36 a month. If rates jump to 3.5% or 3.75%, monthly payments would increase to $956 and $986 respectively. And in more expensive coastal markets, the savings easily reaches hundreds of dollars a month.
“Rates are near historic lows, and we expect rates to hover near current levels through the first quarter of 2021. Although we expect rates to slightly increase as the economy recovers from Covid-19, it remains to be seen when that recovery truly gains traction. While these rate fluctuations may seem like small changes, when homeowners do the math it is clear how lower rates can significantly reduce monthly payments for the life of the mortgage,” said Zillow senior economist Chris Glynn. “Like with any consumer decision, it is important to be informed, research the market and shop around to find the best deal possible. Qualified mortgage professionals can help individual consumers identify the loan rate, repayment term, and structure that meet their needs.”
Monthly Mortgage Payment Scenarios
Metro Area*
Current Rate (2.68%) & home value
3% Interest Rate & 8% home value a ppreciation
3% Interest Rate & 12% home value appreciation
3.5% Interest Rate & 8% home valueappreciation
3.5% Interest Rate & 12% home value appreciation
United States
$861
$969
$1,005
$1,032
$1,071
New York, NY
$1,660
$1,868
$1,938
$1,990
$2,064
Los Angeles, CA
$2,395
$2,695
$2,795
$2,871
$2,977
Chicago, IL
$836
$941
$976
$1,002
$1,040
Dallas-Fort Worth, TX
$876
$986
$1,023
$1,050
$1,089
Philadelphia, PA
$890
$1,002
$1,039
$1,068
$1,107
Houston, TX
$740
$833
$864
$888
$921
Washington, DC
$1,527
$1,719
$1,783
$1,831
$1,899
Miami-Fort Lauderdale, FL
$1,034
$1,164
$1,207
$1,240
$1,286
Atlanta, GA
$847
$953
$988
$1,015
$1,053
Boston, MA
$1,735
$1,952
$2,025
$2,080
$2,157
San Francisco, CA
$3,779
$4,253
$4,411
$4,530
$4,698
Detroit, MI
$638
$718
$744
$765
$793
Riverside, CA
$1,385
$1,559
$1,616
$1,660
$1,721
Phoenix, AZ
$1,063
$1,196
$1,240
$1,274
$1,321
Seattle, WA
$1,897
$2,135
$2,214
$2,274
$2,358
Minneapolis- St. Paul, MN
$1,023
$1,152
$1,194
$1,227
$1,272
San Diego, CA
$2,196
$2,472
$2,564
$2,633
$2,731
St. Louis, MO
$632
$712
$738
$758
$786
Tampa, FL
$821
$924
$958
$984
$1,020
Baltimore, MD
$1,025
$1,154
$1,197
$1,229
$1,275
Denver, CO
$1,558
$1,754
$1,819
$1,868
$1,937
Pittsburgh, PA
$569
$641
$664
$682
$708
Portland, OR
$1,466
$1,651
$1,712
$1,758
$1,823
Charlotte, NC
$845
$951
$986
$1,013
$1,050
Sacramento, CA
$1,537
$1,730
$1,795
$1,843
$1,911
San Antonio, TX
$712
$801
$831
$853
$885
Orlando, FL
$884
$995
$1,032
$1,060
$1,099
Cincinnati, OH
$667
$750
$778
$799
$829
Cleveland, OH
$562
$633
$656
$674
$699
Kansas City, MO
$728
$819
$849
$872
$905
Las Vegas, NV
$1,015
$1,142
$1,184
$1,216
$1,261
Columbus, OH
$748
$842
$873
$896
$930
Indianapolis, IN
$655
$737
$764
$785
$814
San Jose, CA
$4,167
$4,691
$4,864
$4,996
$5,181
Austin, TX
$1,225
$1,379
$1,430
$1,468
$1,523
Virginia Beach, VA
$846
$953
$988
$1,015
$1,052
Nashville, TN
$973
$1,095
$1,135
$1,166
$1,209
Providence, RI
$1,144
$1,288
$1,335
$1,372
$1,422
Milwaukee, WI
$703
$791
$820
$843
$874
Jacksonville, FL
$805
$906
$940
$965
$1,001
Memphis, TN
$555
$625
$648
$665
$690
Oklahoma City, OK
$547
$615
$638
$655
$679
Louisville, KY
$635
$715
$742
$762
$790
Hartford, CT
$837
$942
$977
$1,003
$1,040
Richmond, VA
$861
$970
$1,005
$1,033
$1,071
New Orleans, LA
$718
$808
$838
$860
$892
Buffalo, NY
$624
$702
$728
$748
$775
Raleigh, NC
$983
$1,106
$1,147
$1,178
$1,222
Birmingham, AL
$604
$679
$705
$724
$750
Salt Lake City, UT
$1,386
$1,560
$1,618
$1,662
$1,723
*Table ordered by market size
About Zillow Group Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make it easier to unlock life’s next chapter.
As the most-visited real estate website in the U.S., Zillow® and its affiliates offer customers an on-demand experience for selling, buying, renting or financing with transparency and nearly seamless end-to-end service. Zillow Offers® buys and sells homes directly in dozens of markets across the country, allowing sellers control over their timeline. Zillow Home Loans™, our affiliate lender, provides our customers with an easy option to get pre-approved and secure financing for their next home purchase. Zillow recently launched Zillow Homes, Inc., a licensed brokerage entity, to streamline Zillow Offers transactions.
Zillow Group’s affiliates and subsidiaries include Zillow®, Zillow Offers®, Zillow Premier Agent®, Zillow Home Loans™, Zillow Closing Services™, Zillow Homes, Inc., Trulia®, Out East®, StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).
Rocket Mortgage by Quicken Loans Ranks Highest in Customer Satisfaction for 11th Consecutive Year
Troy, MI – November 09, 2020 (BUSINESS WIRE) Record low interest rates have driven U.S. home sales to a 14-year high and spurred a 200% annual increase in refinancing. While this boom in volume has generally been positive for primary mortgage originators, it has also exposed underlying weaknesses in their digital strategies that could create challenges down the road. According to the J.D. Power 2020 U.S. Primary Mortgage Origination Satisfaction Study,SM released today, mortgage originators’ shortcomings in the areas of self-service tools for application and approvals, frequent communication and long loan processing times could negatively affect customer satisfaction over time.
“It’s been a complicated year for the mortgage industry,” said Jim Houston, managing director of consumer lending and automotive finance intelligence at J.D. Power. “Between surging customer volumes on the origination side, an influx of customer inquiries on the servicing side and a workforce that has been completely displaced by the pandemic, resources have been stretched to their limits. That strain is showing up in slower loan processing times, missed opportunities to communicate and unreliable self-service tools. While some of these shortcomings may have been opportunities in prior years, current market conditions and customer satisfaction metrics indicate that mortgage originators need to look hard at fixing them if they want to stay viable.”
Following are some key findings of the 2020 study:
Overall customer satisfaction buoyed by low rates: Overall customer satisfaction with primary mortgage originators rises six points (on a 1,000-point scale) this year, driven largely by the competitiveness of interest rates offered. However, satisfaction in several critical client service attributes, such as loan processing time, ease of self-service interaction and helpfulness of customer service, has declined from a year ago.
Average refinancing processing time increases: In 2020, the average loan refinancing transaction took 42 days from application to closing, up from 39 days in 2019. Accordingly, refinancing customer satisfaction with the timeliness of the application process and length of time from final loan approval to closing declined year over year.
Self-service channel usage falters in application/approval process: The number of customers using self-service channels for loan applications and approvals increased five percentage points this year while the number of customers using personal service channels (in-person, phone and e-mail) declined five percentage points. Despite the increase in utilization, however, satisfaction with the application and approval process among customers using self-service digital channels declined 10 points this year.
Satisfaction directly linked to frequency of communication: The more lenders communicate with customers during the application, closing and onboarding processes, the more customer satisfaction improves. Customers with the highest level of satisfaction (929) receive daily communications from their lender. However, this occurs just 11% of the time.
Study Ranking
Rocket Mortgage by Quicken Loans ranks highest in mortgage origination satisfaction for an 11th consecutive year, with a score of 883. Bank of America (860) and Chase (860) each rank second in a tie.
The 2020 U.S. Primary Mortgage Origination Satisfaction Study measures overall customer satisfaction based on performance in four factors (in alphabetical order): application/approval process; communication; loan closing; and loan offerings. The study was fielded in June-August 2020 and is based on responses from 4,300 customers who originated a new mortgage or refinanced within the past 12 months.
J.D. Power is a global leader in consumer insights, advisory services and data and analytics. A pioneer in the use of big data, artificial intelligence (AI) and algorithmic modeling capabilities to understand consumer behavior, J.D. Power has been delivering incisive industry intelligence on customer interactions with brands and products for more than 50 years. The world’s leading businesses across major industries rely on J.D. Power to guide their customer-facing strategies.
J.D. Power is headquartered in Troy, Mich., and has offices in North America, Europe and Asia Pacific. To learn more about the company’s business offerings, visit JDPower.com/business. The J.D. Power auto shopping tool can be found at JDPower.com.
