Most Popular Reasons Why Homeowners In the Nation’s Largest Metros Are Considering a Refinance

Since the start of the COVID-19 pandemic, mortgage refinances have boomed. Despite rising rates and a shrinking number of refinance applications in recent weeks, many are still thinking about refinancing their mortgage.

Those who refinance often do so to lower their monthly payments, but that’s far from a refinancer’s only goal. When a homeowner uses the LendingTree platform to find a refinance lender, they select one of five key reasons why they’re looking to refinance, four of which aren’t about lowering monthly payments. The reasons are:

• To pay off their mortgage faster
• To browse current mortgage rates
• To get a cash-out refinance
• To change an adjustable-rate mortgage to a fixed-rate mortgage
• To lower monthly housing payments

By analyzing refinance requests made by LendingTree users from the start of 2021 through August, we were able to determine how popular each of these reasons was across the nation’s 50 largest metropolitan areas. In addition, we looked into what share of homeowners considered refinancing for a reason other than those listed above.

Ultimately, we found that although a large percentage of homeowners considered refinancing primarily to lower their monthly payments, a significant amount had other motivations.

Key findings

• On average, nearly 44% of homeowners across the nation’s 50 largest metros cited lowering monthly payments as their primary refinance goal. It was the most popular reason in each metro.
• More than 19% of homeowners, on average, considered refinancing to pay off their mortgage faster. Though it may mean a higher monthly payment, refinancing to a shorter loan term can be an effective way to pay off a mortgage faster and lower how much interest is paid over the life of the loan.
• More than 16% of homeowners, on average, considered refinancing to browse for a lower mortgage rate. Refinancing to a lower rate can be beneficial for various reasons. It can help homeowners reduce their overall monthly housing payment or lower the total amount of interest they pay over the life of their loan. A shorter term loan can also help them keep their payment manageable.
• Getting a cash-out refinance was the main reason for an average of about 15% of homeowners who considered refinancing. Cash-out refinances are especially popular given how high home prices are across much of the country and how much equity many homeowners have built into their homes as a result.
• Less than 2% of homeowners, on average, across the nation’s 50 largest metros considered refinancing to change their adjustable-rate mortgage (ARM) to a fixed-rate mortgage. This figure isn’t surprising given how ARMs declined significantly in popularity after the 2008 housing marketing crash. Nonetheless, those with an ARM may find the stability of a fixed-rate loan easier to manage.
• Some homeowners — an average of nearly 4% — considered refinancing for a reason different from those listed above. Though we don’t know the exact reasons behind their decision-making, homeowners who fell into this category might want to refinance to remove a cosigner from their current mortgage or to get rid of private mortgage insurance, among other possibilities.

Metros where the largest share of homeowners considered refinancing to lower their monthly housing payments

• No. 1 — San Jose, Calif. (51.86%)
• No. 2 — San Francisco (50.71%)
• No. 3 — Las Vegas (50.55%)

Metros where the largest share of homeowners considered refinancing to pay off their mortgage faster

• No. 1 — Buffalo, N.Y. (25.21%)
• No. 2 — Hartford, Conn. (23.25%)
• No. 3 — Pittsburgh (23.08%)

Metros where the largest share of homeowners considered refinancing to browse for a lower mortgage rate

• No. 1 — Milwaukee (19.76%)
• No. 2 — Columbus, Ohio (18.57%)
• No. 3 — Kansas City, Mo. (18.55%)

Metros where the largest share of homeowners considered refinancing to get cash out of their current home

• No. 1 — Buffalo, N.Y. (20.31%)
• No. 2 — Phoenix (18.69%)
• No. 3 — Tampa, Fla. (18.39%)

Metros where the largest share of homeowners considered refinancing to change an ARM to a fixed-rate mortgage

• No. 1 — San Jose, Calif. (3.12%)
• No. 2 — San Francisco (2.85%)
• No. 3 — Boston (2.29%)

Metros where the largest share of homeowners considered refinancing for some other reason

• No. 1 — Memphis, Tenn. (7.59%)
• No. 2 — Jacksonville, Fla. (7.56%)
• No. 3 — Riverside, Calif. (6.44%)

Tips for refinancing a mortgage

Regardless of why homeowners are thinking about refinancing, they should keep the following tips in mind to help them better prepare for — and get the most out of — the refi experience:

• Shop around to get the lowest possible rate on a refinance. By shopping around and comparing refinance lenders, homeowners can help maximize their chances of finding a lower rate on their mortgage. Because different lenders have different lending criteria, homeowners might not get the best rate from the first lender, which is why shopping around is so helpful.
• Build credit. A strong credit score can help make the refinance process that much easier. Not only are homeowners likely to qualify for a refinance if they’ve got a good credit score, but they’re also more likely to get a better rate.
• Don’t forget about closing costs. When refinancing, homeowners usually need to pay between 2% and 6% of their loan amount in closing costs. So, before deciding to refinance, homeowners need to sit down and figure out if they can afford these costs and whether they’ll be worth it for the savings or other benefits from refinancing.

Methodology

Data in this study is derived on the metropolitan statistical area (MSA) level from more than 600,000 homeowners who visited the LendingTree website to compare refinance lenders from Jan. 1, 2021, through Aug. 30, 2021.

Due to rounding, the total percentage of homeowners considering a refinance for each reason may not add up to 100% in every metro.