Over 1 million borrowers can still save cash by refinancing


Aly Yale
Military VA Loan contributor

The average rate on 30-year loans hit 5.11% last week — that’s 200 basis points (2%) higher than at the start of 2022 and the highest rate in over a decade.

Though the jump has made refinancing a costly choice for some homeowners, many — believe it or not — still stand to gain from today’s interest rates.

It’s true: According to data firm Black Knight, about 1.15 million homeowners could still shave a good amount off their monthly payment by refinancing today (and about 160,000 could save serious cash). This is particularly true for VA eligible borrowers who can access VA rates, which are typically lower than the rates available to conventional or FHA borrowers.

Did you put off refinancing your mortgage loan? Here’s what to know about refinancing at today’s rates.

Click here to see whether you could save with a VA refinance (Oct 3rd, 2022)

1 million-plus homeowners can still save $300 per month

Black Knight’s data shows that around 1.15 million homeowners could refinance at 5.11% and still reduce their current interest rate by at least 75 basis points. 

That translates to around $316 in monthly savings per borrower, around $358 million in national aggregate monthly savings, and nearly $4,000 in annual savings per loan. 

Just under 160,000 borrowers could save $500 or more per month — or around $6,000 annually.

Should you refinance at today’s rates?

Because refinancing comes with closing costs (not to mention a little hassle), most experts recommend only refinancing if you can reduce your rate by at least 75 basis points. To achieve this at an average rate of 5.11%, you’d need to have a current rate of 5.76% or higher. 

Rates of that caliber haven’t been seen since late 2008, so if you haven’t refinanced your loan since that point, it might be worth considering a refinance.

You should also take into account your credit score and loan-to-value ratio — or how much mortgage debt you have compared to your home’s value. Black Knight’s data only looks at prime borrowing candidates — those with an LTV of 80% or less and credit scores of 720 or higher. 

If you don’t meet these descriptions, the above data won’t include you — though it’s entirely possible you could still benefit from a refinance. You’d likely see a smaller rate reduction, but if you’re struggling to make payments or you need to free up monthly cash flow, refinancing could be a meaningful financial move.

It’s also important to remember that refinancing doesn’t just help you reduce your rate. You can also refinance into a longer-term loan, which lowers your monthly payments, or you could switch loan types (to remove mortgage insurance, for example). Both of these options come with financial benefits as well.

What does this mean for VA-eligible borrowers?

When compared to other loan types — conventional and FHA, for example — VA home loans offer consistently lower rates than those available for the average consumer.

If you’re VA eligible but do not currently have a VA loan, you may be able to reduce your current mortgage interest rate by an even greater margin.

[copy VA rate chart from this page: https://www.militaryvaloan.com/blog/current-va-refinance-rates/]

Here’s a more in-depth explanation of whether a VA refinance can help you save.

What now?

Every situation is different, but if you want to reduce your rate or monthly payment, reach out to a mortgage professional and get a quote ASAP. 

With another Federal Reserve meeting on the books for next week, it’s likely mortgage rates will rise in the near term. It’s important to lock in your rate soon to ensure maximum savings.

Click here to see whether you could save with a VA refinance (Oct 3rd, 2022)