mortgage refinance

Homeowners Could Save Thousands by Refinancing their Mortgages

TAMPA, Fla. – Mortgage rates are holding steady near historic lows, and homeowners who haven’t refinanced could be tossing thousands of dollars out the window.

The monthly mortgage payment on the typical U.S. home, worth $256,663 in August, would be $951 before taxes or insurance with a 3.75% mortgage rate, near where rates were a year ago. But with a 3.02% rate2, that monthly payment drops to $868, which adds up to nearly $1,000 per year in savings. Over the lifetime of a 30-year loan on that same home, the difference between a 3.75% rate and a 3.02% rate comes out to $29,880.

As the coronavirus pandemic has impacted the U.S. economy, one effect has been persistently low interest rates. The Federal Reserve lowered interest rates to near 0% in March to help bolster the national economy and shows no sign of raising them. As a result, mortgage rates, which generally follow bond yields, have lingered near historic lows.

“Choosing whether to refinance your mortgage is ultimately a personal choice, but recent moves in mortgage rates have probably made that decision a whole lot easier for those who qualify,” said Zillow economist Matthew Speakman. “Mortgage rate declines have allowed many to lower their monthly mortgage payment or tap into the equity they’ve built in their home by refinancing their loan – offering some financial stability to many in a time of great economic uncertainty. With rates poised to stay relatively low for the immediate future, for many – including those paying mortgage insurance – a refi could remain a worthwhile endeavor.”

Refinancing does come with additional fees that can range from 2% to 6% of the loan’s principal3, so homeowners who are planning to move within the next couple years may not save enough on a monthly basis to offset those fees.

Since mortgage payments are based on the price of the home loan, homeowners in pricier markets could see savings of hundreds of dollars each month by refinancing to a lower mortgage rate. In the San Francisco and San Jose metros, where the typical home is worth more than $1 million, the monthly savings from a 3.02% rate instead of a 3.75% rate is more than $350.

Homeowners with smaller loans may not benefit as much from the current low rates unless their current rate is significantly higher. For example, in Memphis, Tenn. and Oklahoma City, the difference in monthly mortgage payments on the typical home with a 3.75% mortgage rate and 3.02% mortgage rate is only $53. Homeowners who are interested in their potential savings from refinancing their mortgage can talk to their lender or use Zillow’s refinance calculator to see what they could save.

Homeowners who are refinancing their mortgages currently make up about 63% of mortgage activity, according to the Mortgage Bankers Association4. Refinancing soon could save borrowers more money than if they wait to refinance. Beginning in December, Fannie Mae and Freddie Mac are planning to charge an “adverse market fee” on most refinanced mortgages they purchase, which the Mortgage Bankers Association estimates will cost about $1,400 on the typical loan5.

Home buyers are currently facing low inventory and climbing prices. As low interest rates keep their monthly payments more affordable, they may be able to stretch their dollar further, giving them more options. Zillow’s affordability calculator can help buyers understand how much purchasing power they have based on their income, down payment and mortgage rate.

Metro AreaTypical
Value in
with a 3.75% 
with a 3.02%
with a
3.75% Rate
with a 3.02%
United States$256,663$951$868$11,412$10,416
New York, NY$493,579$1,829$1,669$21,948$20,028
Los Angeles-Long Beach-Anaheim, CA$706,714$2,618$2,390$31,416$28,680
Chicago, IL$246,357$913$833$10,956$9,996
Dallas-Fort Worth, TX$261,739$970$885$11,640$10,620
Philadelphia, PA$262,437$972$887$11,664$10,644
Houston, TX$222,936$826$754$9,912$9,048
Washington, DC$452,030$1,675$1,529$20,100$18,348
Miami-Fort Lauderdale, FL$310,471$1,150$1,050$13,800$12,600
Atlanta, GA$251,454$932$850$11,184$10,200
Boston, MA$514,321$1,906$1,739$22,872$20,868
San Francisco, CA$1,127,066$4,176$3,811$50,112$45,732
Detroit, MI$188,420$698$637$8,376$7,644
Riverside, CA$400,664$1,484$1,355$17,808$16,260
Phoenix, AZ$312,317$1,157$1,056$13,884$12,672
Seattle, WA$559,226$2,072$1,891$24,864$22,692
Minneapolis-St Paul, MN$305,202$1,131$1,032$13,572$12,384
San Diego, CA$643,903$2,386$2,177$28,632$26,124
St. Louis, MO$187,795$696$635$8,352$7,620
Tampa, FL$242,924$900$821$10,800$9,852
Baltimore, MD$302,464$1,121$1,023$13,452$12,276
Denver, CO$458,600$1,699$1,551$20,388$18,612
Pittsburgh, PA$167,172$619$565$7,428$6,780
Portland, OR$429,608$1,592$1,453$19,104$17,436
Charlotte, NC$249,960$926$845$11,112$10,140
Sacramento, CA$444,733$1,648$1,504$19,776$18,048
San Antonio, TX$211,964$785$717$9,420$8,604
Orlando, FL$266,005$986$899$11,832$10,788
Cincinnati, OH$197,135$730$667$8,760$8,004
Cleveland, OH$168,298$624$569$7,488$6,828
Kansas City, MO$214,639$795$726$9,540$8,712
Las Vegas, NV$302,071$1,119$1,021$13,428$12,252
Columbus, OH$222,467$824$752$9,888$9,024
Indianapolis, IN$192,677$714$652$8,568$7,824
San Jose, CA$1,224,366$4,536$4,140$54,432$49,680
Austin, TX$357,346$1,324$1,208$15,888$14,496
Virginia Beach, VA$252,041$934$852$11,208$10,224
Nashville, TN$289,792$1,074$980$12,888$11,760
Providence, RI$333,191$1,234$1,127$14,808$13,524
Milwaukee, WI$212,166$786$717$9,432$8,604
Jacksonville, FL$240,785$892$814$10,704$9,768
Memphis, TN$164,254$609$555$7,308$6,660
Oklahoma City, OK$165,014$611$558$7,332$6,696
Louisville-Jefferson County, KY$189,706$703$641$8,436$7,692
Hartford, CT$246,821$914$835$10,968$10,020
Richmond, VA$256,417$950$867$11,400$10,404
New Orleans, LA$215,218$797$728$9,564$8,736
Buffalo, NY$183,071$678$619$8,136$7,428
Raleigh, NC$292,160$1,082$988$12,984$11,856
Birmingham, AL$174,875$648$591$7,776$7,092
Salt Lake City, UT$405,189$1,501$1,370$18,012$16,440

*Payments do not include taxes, insurance or HOA dues

About Zillow

Zillow, the most visited real estate website in the U.S., is building an on-demand real estate experience. Whether selling, buying, renting or financing, customers can turn to Zillow’s businesses to find and get into their next home with speed, certainty and ease.

In addition to for-sale and rental listings, 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.

Millions of people visit Zillow Group sites every month to start their home search, and now they can rely on Zillow to help them finish it — with the same confidence, ease and empowerment they’ve come to expect from real estate’s most trusted brand.

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