Mortgage refinance prospects increased to 5.9 million applications in May 2019. According to Black Night monitor, these refinances represent a potential $16 billion in monthly savings. This becomes a savings average $271 per month for those homeowners refinancing their loans.
Here’s another statistic from Black Knight. Roughly 953,000 of these home owners took out their loans in 2018. This is the largest volume of any mortgage years, more than in 2012-2017 combined.
The number of mortgage applications has increased as interest rates have dropped to their lowest level since 2018. With rates under 4%, mortgage refinance prospects are hoping to take advantage of the opportunity.
Millions of Homeowners Can Benefit from Refinancing
According to the Mortgage Bankers Association, if rates dropped just another one-quarter of a point, close to 7 million more borrowers would benefit from refinancing. That is huge. Mortgage marketers need to be ready to get their marketing campaigns out the door if and when this happens.
The Mortgage Bankers Association also points out that many potential home buyers are sitting out right now, due to economic uncertainties. However, there are still more mortgage applications that there were a year ago.
Last week, the refinance share of mortgage activity was over 42%. That is up from 32% at the end of 2018. Despite these recent increases, mortgage refinance prospect volumes remain historically low.
A mortgage refinance prospect is defined as a home owner who would save at least 75 basis points in the interest rate on their loan.
Consider FHA Loan Borrowers
Another great group for refinancing are FHA loan borrowers. They can potentially benefit from refinancing into a conventional loan. Refinancing into a lower rate will reduce interest costs but also knocks out monthly Private Mortgage Insurance (PMI) payments. Daniel M. Shlufman, a mortgage banker at Classic Mortgage in Maywood, New Jersey explains that PMI payments are typically 0.5 to 1 percent of the total loan on a yearly basis. For borrowers with a $200,000 mortgage and a PMI payment of 1 percent, they can save $2,000 per year or $167 per month. Since PMI is more expensive on FHA loans, those qualified borrowers might save a small mint by reducing or eliminating their FHA PMI and locking in a lower rate.
I have one final comment. Once you’ve gotten that mortgage application from your prospect, make sure you ask the right questions to help you close that loan.