18 Million Homeowners Could Be Missing Out on a Chance to Refinance

If you're one of them, it's time to get moving.

Historically low mortgage rates mean one thing: Now's a good time to get a new home loan, whether you're buying for the first time, or own a home already. If you're in the latter category, refinancing your mortgage is the way to go. Though refinance rates are slightly higher than rates on a new purchase mortgage, they're still extremely competitive. Although many homeowners have rushed to refinance, others may miss the boat -- there are almost 18 million refinance candidates who have yet to apply for a new home loan, reports Black Knight.

If you haven't looked into refinancing this summer, get moving. Otherwise, you could miss out on a lucrative opportunity to lower your housing costs and make your home loan far more affordable.

Does it pay for you to refinance?

Refinancing doesn't always make sense. You shouldn't refinance if:

• Your credit score needs work.
• You're not planning to stay in your home for long (you'll pay closing costs on your refinance that you'll only recoup over time, so if you won't be staying in your home long, you'll risk losing money with a new home loan).
• You already have a very low rate on your mortgage.

On the other hand, refinancing could be worth your while if:

• Your credit score is strong -- in the mid-700s or higher.
• You plan to stay in your home for at least a few years.
• You can lower the interest rate on your mortgage by 1% or more.

How much would refinancing save you?

The amount you save by refinancing depends on your loan amount and interest rate. But here's an example to show you what you might gain with a new home loan.

Say you have 20 years left on your mortgage; you still owe $200,000; and your current rate is 4%. If you keep paying off that loan, you'll spend $1,509 a month on principal and interest, and you'll spend close to $91,000 on mortgage interest between now and your payoff date.

Let's say you refinance to a 20-year mortgage at a 3% interest rate. That lowers your monthly payment to $1,407 for principal and interest, and you'll spend about $66,000 on interest, not $91,000.

Of course, you pay closing costs on that refinance. For a $200,000 balance, it's conceivable you'd pay $4,000 to process your new loan. But even if you count that against your savings, you will still come out way ahead if you stay in your home for 20 years. Even if you only stay in your home for five more years, in this example, your new mortgage payment will be $102 less per month than your old one, which means you'll break even in 39 months, then enjoy savings each month thereafter.

Why you should apply to refinance sooner rather than later

Beginning Dec. 1, mortgage refinances will be subject to a 0.5% fee that lenders will likely pass on to borrowers. That means if you wait too long to apply for a new home loan, you could spend more to get it. Remember that it can take 30 to 45 days for a mortgage refinance to close, and if your new loan isn't complete before Dec. 1, you could still face that dreaded fee. So if you're thinking of refinancing, shop around for offers now. The more lenders you speak to, the greater your chances of coming away with a rate you're pleased with.