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Interest rates bottomed out once COVID hit, but most homeowners still haven't refinanced

A Bankrate survey shows that millions of homeowners haven't taken advantage of historically low rates.

It's your move as a homeowner while interest rates are still low.
Matt Elliott/CNET

As COVID-19 began to spread across the US, interest rates sank to their lowest level ever. But a Bankrate survey fielded in July found that 74% of homeowners haven't refinanced their mortgages since the beginning of the pandemic. 

That means millions are missing out on potential benefits -- including a lower monthly payment or taking out cash at a low interest rate. Now is a good time to act, as rates have started slowly creeping up and are forecasted to keep rising

The Bankrate survey suggests that misperceptions about refinancing may be to blame. Almost a quarter of survey respondents said that they hadn't refinanced because of concerns related to the amount of paperwork. Though you might need to invest some time assembling your documents, it's a relatively minor lift -- especially in the context of the potential financial upside, said Alex Madonna, executive vice president of direct lending at loanDepot.

"A lot of the paperwork a homeowner may have been accustomed to providing -- as recently as four or five years ago -- has been minimized due to automation," Madonna said. 

In the survey, 47% of respondents were skeptical that they would save enough money to make refinancing worth it. But an improving economy and rising inflation means out-of-pocket expenses for many Americans are up, and refinancing can offer you more breathing room in your monthly budget. 

Not only are interest rates historically low right now, but home values are also historically high, offering you the option to tap into your home's newly built-up equity -- which may not last forever. It's likely that home prices will also start to drop as interest rates rise over the coming year, giving you a double incentive to refinance right now.

The potential windfall of a refinance is significant -- and it's actually relatively simple to kickstart the process. The first step is to do the math using an online mortgage calculator, and validate whether a refinance could make sense for you. "The length of time, the paperwork and the hassle have all been significantly diminished over the last few years," Madonna said. You can qualify and lock in a new rate in as little as three weeks

Bottom line: If you've hesitated to refinance so far, it's OK -- the moment has not passed. But don't wait any longer to explore your options. Act now and you could have your refinance wrapped up before the holidays.