Want to save money on your mortgage payments? With interest rates near record lows, refinancing could be a good option, with potential savings of hundreds of dollars every month. So why don’t more people do it? Consumer Reports helps you make the best refinancing decision for you and your budget.
Despite the prospect of saving thousands of dollars off their loan, many homeowners aren’t refinancing to take advantage of these historically low interest rates. And that’s especially true for minority homeowners.
A recent study found that only 6 percent of all refi applications came from Black borrowers, and only 9 percent came from Latinos.
Refinancing often takes some time and money. Banks need all of the same information you provided when you were first approved for a mortgage: proof of consistent employment, 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 is hitting Black and Latino communities much harder than other groups, and you can begin to see why people in communities of color don’t refinance at the same rate as white homeowners.
But there are some ways to close that gap. Consumer Reports says working with a HUD-approved housing counseling agency can help answer your questions and get you started.
These agencies can help you get your documents in order, explain what refi options are best for you, and assist you in calculating the costs of a refi and how long it’ll take to pay the loan back.
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 done, 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 children’s education.