Over the past year, mortgage interest rates have dropped more than 1 percentage point, creating a rush to refinance. But homeowners in some states are having better luck at refinancing their mortgage and locking in a lower monthly payment on their mortgage.
Overall, about 75% of mortgage refinance applications are approved nationally.
Home value appreciation and credit scores matter most when it comes to refinance approvals, researchers at LendingTree note. They analyzed more than 10 million mortgage refinance approvals by state and compared those rates to home-price appreciation and average credit scores.
Overall, Utah homeowners had the highest approval rate at 82%, followed by applicants in North Dakota and South Dakota.
On the other hand, New Mexico and Florida homeowners had the lowest rate of refinance approvals.
Some homeowners are bypassing refinancing altogether. But they may be passing up some big savings. LendingTree presents the following example: A borrower who had a $300,000 loan in November 2018 at a 4.75% mortgage rate could save about $200 per month on their payment and more than $50,000 on lifetime interest by refinancing at 3.75%.
“The availability of a lower interest rate is only one of the conditions needed to refinance a mortgage,” says Tendayi Kapfidze, LendingTree’s chief economist and lead author of the study. “Borrowers often need to have some equity in their home, especially if they want to take cash out, and a solid credit score. Fortunately, increases in home prices since 2012, combined with paying down their loan balances, means many borrowers have built considerable equity in their homes.”
Homeowners with strong home value appreciation see an interest rate difference of 0.50, while those with strong credit scores see a rate difference of 0.64 in their favor, the researchers found.
Source: “75% of Mortgage Refinances Get Approved, and These States Have the Highest (and Lowest) Approval Rates,” LendingTree (Dec. 2, 2019)
