) -- Americans spend more time looking into home-improvement projects than they do on refinancing. With mortgage rates at less than 5% this year, the lowest in any 10-month stretch since 1971, proper research can save tens of thousands of dollars during the life of a home loan.
"People seem not to want to spend a lot of time on mortgage shopping, but it's incredibly important," says Stan Humphries, chief economist for Zillow.com, a real estate Web site that provides price estimates on 70 million U.S. homes. "It's very common that people will just reach out to their current lender to see what they can do about rates."
Humphries says those who plan to refinance ought to check different lenders' rates -- as well as their reputation.
A recent survey by Harris Interactive for Zillow.com of 2,897 consumers who obtained or refinanced a home loan in the past five years found they typically spent only five hours on research. An equal amount of time was spent planning a vacation and, on average, more time was taken in researching a car purchase (eight hours) and home improvements (10 hours). When calculated as time spent per dollar invested, Harris Interactive determined that Americans spend almost 80 times more time researching their vacation than a home loan.
According to Zillow's Mortgage Marketplace, refinance-loan requests through its site are up 39% since September, making up more than 51% of all consumer-loan requests. Its sampling of offered rates is even more competitive than
statistics. On Nov. 2, its average 30-year mortgage rate was 4.78%, 77 basis points lower than in June, when it was 5.55%, the highest this year.
Refinancing has accounted for almost seven of 10 mortgage applications this year, according to Frank Nothaft, chief economist at Freddie Mac. Thirty-year fixed-mortgage rates were 6.46% a year ago, according to Freddie Mac.
Even a slight decrease in rates can mean big savings. Assuming a fixed rate of 4.9% on a $200,000 loan (with a home price of $250,000), the monthly principal and interest payment would be $1,064, compared with $1,141 for the same loan in June. The savings would total $27,788 over the life of the loan.
Zillow.com's Humphries doesn't expect the record-setting lows to last much longer. As the Federal Reserve ramps down its purchase of mortgage-backed securities, he expects rates to begin to rise in the first quarter.
"You see plenty of people speculating on both sides, but I would definitely say that the probability of the upside in outweighs the probability of the downside," he says.
For the time being, the refinancing surge is great news for mortgage lenders such as
Bank of America
. Low rates should help offset any drop in home sales, a trend likely to emerge as the year draws to a close and the government ends its $8,000 tax credit for first-time buyers.
But, for now, home sales have continued to show momentum. According to the National Association of Realtors, pending home sales rose in September, marking eight consecutive monthly gains, the longest streak since 2001. The group's Pending Home Sales Index, based on contracts signed in September, rose 6.1% from August, and is 21% higher than a year earlier.
-- Reported by Joe Mont in Boston.