Vishal Garg is the founder and chief executive officer at Better, a digital-first homeownership company whose services included mortgage, real estate, title, and homeowners insurance. From its founding in 2016 through 2020, Better funded $30.9B in home loans and provided over $7B in cumulative coverage its insurance divisions. The company was ranked #15 on CNBC’s Disruptor 50 2020 list and listed to Forbes FinTech 50 for 2020.
Over the course of the pandemic, millions of higher income and savvy homeowners took advantage of low interest rates to refinance their home loan and save money, but around 2 million middle-class homeowners — particularly those with careers in industries affected by the pandemic such as hospitality, travel, and retail — were ineligible.
Similar to how the Paycheck Protection Program (PPP) provided support and opportunity to our nation’s small businesses affected by the pandemic, the Federal Housing Finance Agency (FHFA) is now expanding refinancing eligibility so more homeowners qualify and can benefit from a lower interest rate.
The program is called RefiNow, and the goal is to allow previously ineligible consumers who have Fannie Mae — or in the case of Refi Possible, Freddie Mac-backed — loans to take advantage of lower rates. This is a huge deal to these homeowners. Lower rates lead to three major benefits: lower monthly payments, more predictable payments, and more money in consumers’ pockets every month.
Lower Monthly Payments
Homeowners who refinance their mortgages can save hundreds of dollars each month, with an average home loan of about $250,000, a family might save as much as $250 per month after tax or $3,000 per year.
That's a lot of cheddar, anyway you slice it. Monthly savings give homeowners breathing room and ensure they can support themselves and their families beyond the necessity of shelter.
More Predictable Payments
If homeowners currently have an adjustable-rate mortgage, they can switch to a fixed-rate mortgage with more predictable monthly payments, particularly in an economy that is doing well and with interest rates on the rise.
Predictable monthly payments can help homeowners manage their household budgets. Life is already unpredictable, and those whose incomes have been affected by the pandemic might have jobs that are unpredictable too, so consistent monthly mortgage payments can help ease the financial stress on a homeowner.
More money in your pocket every month
With lower or more predictable monthly payments, consumers end up with more money in their pockets every month and paying off their mortgage becomes a bit easier. As a result, homeowners can live a little more comfortably.
The FHFA’s RefiNow program is similar to PPP but for homeowners, and qualified individuals should take advantage of it now. Homeowners can see if they qualify nearly instantly with a simple online interface, and even lock in a rate and savings online within minutes after completing the application. As little as 30 minutes could equal $3,000 per year of savings for the remaining term of a mortgage.
Even better, unlike traditional banks or mortgage companies, we have been able to adapt our engine to these new eligibility rules to specifically help consumers who qualify for this program. There are over 300,000 loan officers in the country and most of them will not have heard about this program or due to their commission-oriented business will be less focused on these consumers. At Better, we are stepping up to the challenge of helping all Americans, especially those affected by the pandemic, access these savings, and make home better for them.
Read more information and tips in our Mortgage section