Here's why people are talking about refinancing mortgages so much right now


If you Google "mortgage refinance" right now, toward the top of the results you'll see a bunch of news articles about a "refinancing boom," and experts saying it's a "good time to refinance."

There are a couple of reasons finance people talking about this. An upcoming rate change by the federal government is one; and historically low interest rates on mortgage loans is the other.

Here's a look at each piece, and why it benefits refinancing.

First: Let's get refinancing straight

What does it mean to refinance your mortgage?

Basically, you pay off your old mortgage plan with a new mortgage loan, and then pay off the rest of the new mortgage loan month-to-month instead of your old one, BankRate explains.

There are a number of reasons people do it. Most commonly, it's to try to get a lower interest rate than what you're currently paying.

A refinancing can also be done to take advantage of the value of a home going up, and it can result in some extra money to make a big purchase (such as a car) or do some remodeling. There are lots of ins and outs, and ifs and buts, so for more details check out the Mortgage Calculator.

So why is now a good time to refinance?

There are two key reasons why people are saying this, the Wall Street Journal reports.

One: President Barack Obama said last week he's cutting mortgage insurance premiums, Bloomberg reported.

That insurance premium is paid by home buyers who put a small down payment on the house. It's charged by the Federal Housing Administration, a government agency, in order to guarantee the lender they get the money back.

Currently, the rate is 1.35 percent of however much of the loan is left to pay. Starting Jan. 26, it will go down to 0.85 percent.

The Wall Street Journal has more details.

Two: The interest rates on mortgages are historically low.

The rate fell below 4 percent for the first time since 2013, Reuters reports, with the average for a 30-year fixed mortgage sitting at 3.89 percent.

That's led to a huge surge in mortgage applications being filed, Reuters says.

How does this save me money?

The Star Tribune, citing a Consumer Financial Protection Bureau report, says only 53 percent of Americans did comparison shopping when deciding who to get a mortgage loan from.

That could be costly – as the report explains (click here to read the whole thing), getting an interest rate of 4.0 percent instead of 4.5 percent could mean you pay $60 less a month. Add it up, that's $3,500 in savings over five years.

If interest rates are much lower than when you first got a mortgage, refinancing could lower how much you have to pay each month.

However, a lender has to approve a refinancing – you can't just go out and do it. And oftentimes there are closing costs and other fees involved with refinancing, that can make doing so costlier than you think.

Still, with the current climate, things look good for anyone interested.

KSTP spoke with a local mortgage strategist about the potential upcoming wave of refinances; he told the station they're preparing for some upcoming "hype."

This embed is invalid

Next Up

Jaden McDaniels

Wolves lose to Magic on Cole Anthony's buzzer-beater

The Wolves blew a 20-point lead as the Magic defeated the Timberwolves on Wednesday night.

J.A. Happ

Twins sign veteran J.A. Happ to add to the rotation

The left-hander will get a one-year, $8 million deal from the Twins.

storm the capitol rally st. paul minnesota state capitol

BCA finds 'no criminal wrongdoing' among those at 'Storm the Capitol' rally

Inflammatory comments were made by speakers, but no charges will be brought.

Screen Shot 2021-01-18 at 12.27.04 PM

Man's vehicles crushed by hit-and-run driver weren't fully insured

The goal is to raise $25,000 to help the south Minneapolis resident.

Joe Biden

Key points from Joe Biden's first speech as POTUS

The 46th president called for unity at a time America is facing huge challenges.

coronavirus, covid-19

Here is Minnesota's COVID-19 update for Wednesday, January 20

The 111 ICU patients is the fewest in Minnesota since there were 109 COVID patients in intensive care on Oct. 1.


Here's what Amy Klobuchar said at Joe Biden's inauguration

The Minnesota senator was one of the leader organizers of the inauguration.

covid-19, vaccine

All of this week's COVID vaccine pilot program appointments are filled

Nearly 6,000 Minnesotans who are 65 and older registered for appointments between noon Tuesday and Wednesday morning.

Lane kueng thao chauvin

Osterholm affidavit ahead of George Floyd trial warns of COVID worsening in March

Prosecutors want to delay the Chauvin trial due to a public health threat.