Most Missed Out on Refinancing Bonanza

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Borrowers who refinanced at record low mortgage rates last year were able to save big—but financial factors, daunting processes, and even racial inequality kept many on the sidelines.

Seventy-eight percent of established homeowners passed up the opportunity to refinance last year, according to a survey released Wednesday by Zillow. Black and Hispanic homeowners were more likely than White and Asian ones to miss out on refinancing last year, a report by the Boston Federal Reserve, released Tuesday, found.

Key Takeaways

  • Among established homeowners, 78% passed up the chance to refinance at low mortgage rates last year, citing confusing procedures, potential moves or mortgage payoffs, and high fees. 
  • Of the 22% who did refinance, it was worthwhile: Almost half saved $300 a month or more.
  • Black and Hispanic homeowners were more likely to miss out on refinancing opportunities, a Boston Fed report found.


Refinancing was certainly an attractive proposition for many homeowners—among the 22% who did refinance, 47% said they cut their monthly payments by at least $300, according to Zillow’s poll of 1,300 homeowners who hadn’t moved in the past year. But the ones who took a pass had plenty of reasons, including that fees were too high (38%), that they were considering moving or paying off their mortgage soon (37%), or that they didn’t understand how it worked (29%.) And no wonder—those who pulled the trigger did not find the process easy to navigate. “Homeowners who have recently refinanced ranked the process as less difficult than getting a divorce or following a strict new diet, but significantly tougher than training a puppy,” Zillow’s report on the survey said. 

Rates for 30-year fixed mortgages, the most popular home loan, were already highly favorable to borrowers in June of 2020 and slid to a record low of 2.65% in January 2021 according to Freddie Mac’s measure. They’ve gone up since then but are still relatively good. The vast majority of refinancers—89%—polled by Zillow said these low rates were a reason why. In a refinancing, borrowers replace their existing home loan with a new one, either to get a lower interest rate or to cash out the equity in their homes, paying a fee to do so. But it doesn’t always make financial sense to refinance, even at a lower rate, experts say, depending on whether the benefit of the lower rate will outweigh the cost of the fees.

Racial Inequality Means Many Were Left Out

The benefits of the low rates were not shared equally among all groups. Just 6% of Black homeowners refinanced through October in 2020, compared to 9% of Hispanic, 12% of White, and 14% of Asian borrowers, according to the Boston Fed report. Put another way, of the estimated $5.3 billion that homeowners saved by refinancing only 3.7% went to Black households even though they make up 13.3% of the population and 9.1% of all homeowners.

Black and Hispanic borrowers were more likely to have lower credit scores and higher loan-to-value ratios in their mortgages, both of which are barriers to refinancing, the Fed researchers said in the report, which also found that Black, Asian, and Hispanic borrowers were more likely to miss payments due to financial distress during the pandemic. “The COVID-19 pandemic exacerbated racial disparities in U.S. mortgage markets,” the researchers said in the report. “Borrowers who could use the payment reductions the most moving forward may be the least likely to obtain them.”

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