Consumer Reports: Why many people do not refinance their mortgages - and why they should
Many homeowners could benefit from the savings, and now is the time to act.
PHILADELPHIA (WPVI) -- With potential savings of hundreds of dollars every month, refinancing is something to look into right now as rates will go up later this year.
Yet a lot of people are hesitant, especially minorities, so the folks at Consumer Reports have some advice.
Nathanael and Jogenia Gonzlez wanted to take advantage of lower mortgage rates, so they recently refinanced for big monthly savings.
"Before I was paying 4.1 percent, now it dropped to 2.8 percent. We are saving about $400," he said.
Many homeowners could benefit from similar savings but remain hesitant.
"Despite the prospect of saving thousands of dollars off their loan, many homeowners are not refinancing their loans to take advantage of these historically low interest rates. And we know that's especially true for minority homeowners," said Consumer Reports Money Editor Octavio Blanco.
A recent study found that only six percent of all refi applications came from Black borrowers, while only nine percent came from Latinos.
Refinancing can take time and money. Plus, banks need all of the same information you provided when you were first approved for a mortgage including a consistent employment history, tax returns, a credit check, and other financial documents.
It can feel overwhelming and not worth it.
Add to that the COVID-19 pandemic, which hit Black and Latino communities much harder than other groups, and you can begin to see why communities of color don't refinance at the same rate as their white neighbors.
But there are some ways to close that gap.
Consumer Reports said working with a HUD-approved housing counseling agency can help answer your questions and get you started.
"They can help you get your documents in order, explain what refi options are best suited for you, assist you in calculating the costs of a refi and how long it'll take to pay those back," said Blanco.
They might suggest shopping around beyond your current lender and applying to several banks for refinancing. This could improve your chances of getting approved, and you might even find a better rate.
And when your refi is over, don't forget to have a plan for your savings. CR suggests you up your emergency cash reserves, increase your retirement contributions, or put money in a 529 plan for your children's education.
