20% of Homeowners are Not Refinancing When They Should

Why would any American household forgo thousands of dollars in savings? That is an excellent question, and it was posed by the authors of a study that was recently released by the National Bureau of Economic Research (NBER).

The study attempted to

quantify the missed savings opportunities from American homeowners failing to refinance with favorable interest rates. Based on data from U.S. mortgage holders in December 2010, the authors concluded that 20% of households missed the opportunity to save money through refinancing - at a median cost of around $11,500 per household and a whopping $5.4 billion in overall savings.

To illustrate, the NBER summary used the example of a $200,000 mortgage with a 30-year fixed interest rate. The difference between a 6.5% rate and a 4.5% interest rate results in over $80,000 in savings from interest payments over the life of the loan. If the interest rate went as low as 3.35%, the savings grows to $130,000. These numbers take into account the average costs associated with refinancing.

For reference, the interest rate in December 2010 was in the general range of 4.7% but in the midst of a temporary spike. It is below 4% as of this writing, thus the survey is at least equally relevant to 2015.

To determine who would benefit from refinancing, each loan was analyzed for potential savings given the characteristics of the loan. Along with the interest rate, consideration was given to the payment history and current balance, as well as more specific loan terms. Second liens were also taken into account.

Adjustments were made for factors ranging from the probability of relocation to the impact of taxes. However, one thing that is difficult to adjust for is the other side of the equation - the ability to find a willing lender.

In 2010, banks were still adjusting from the subprime housing crisis and being threatened with buybacks of bad loans (which in part came to pass). The study takes place during a significant phase of credit tightening, where banks were being preemptive at being stuck with risky loans.

Even the Home Affordable Refinance Program (HARP), which was specifically targeted at homeowners who owed more on their mortgage than the home was worth, suffered from excessive mortgage application denials due to banks who set stricter requirements than HARP for program acceptance.

Nevertheless, the study authors claim to have compensated for these factors as best they possibly could, and suggest that much of the problem lies in lack of education and understanding. They suggest that housing advisory and counseling groups could offer more detailed programs to help people understand the benefits of refinancing.

Mistrust of the banking system was also cited as a possible reason - certainly, an understandable result given the public perception of the banking and housing systems as America pulled out of the Great Recession. Yet another potential reason is good old-fashioned American procrastination.

However, these excuses surely do not apply to you. If you have a mortgage interest rate well over today's unusually low fixed rates, you should at least consider refinancing. Credit is still tight but is loosening somewhat, and the economy seems to be poised for a significant recovery - which will lead to higher interest rates.

Try using a MoneyTips refinancing calculator to check your savings. You may find that the potential savings are too tempting to ignore. 

For most of us, there's no bigger purchase than buying a home. And with big purchases, even minor fees can carry a big price tag.

Before signing the paperwork and taking on a mortgage, it's a good idea to get educated about the process. Many people either don't know or forget to factor in the closing costs they will pay. This is the money paid, usually upfront, to close the real estate deal. And it can be hard to know just how much you will have to pay ahead of time. In general, you can usually estimate the fees will add up to between 2%-5% of the home's value, the range is usually so large because they are a collection of different expenses that apply for different reasons. To help you understand what you are paying, check out some of the common closing costs.

1. Lender Charges

There are two categories of charges you pay your lender to secure your mortgage. First is the origination charge - the standard cost all lenders charge for the service of getting you a loan. This is essentially the broker or loan officer's compensation for making the deal. Around 1% of the loan amount is not unusual. The second, mortgage points, are what you pay in order to secure a lower interest rate. You can pay more points upfront so you can pay less in interest during the term of your loan. This can be a good option for people who have more money available but a less-than-stellar credit score or when interest rates are higher.

2. Settlement Services

Buying a home is a business deal. Closing a real estate deal requires some administrative and legal work and that doesn't come cheap. These expenses usually include the cost of pulling your credit report, having your home appraised and to have the sale documented by the local government. Other fees included as settlement services are flood certification, title services, lender's title insurance, owner's title insurance, home inspection, postage, survey costs, transfer taxes, attorney, closing and settlement fees.

3. Prepaid & Escrow

The final category of closing costs is what you have to pay upfront for fees you will then pay continually and regularly. Some of these are placed into an escrow account, a special holding account where funds can only be accessed in certain circumstances. Prepaid costs can include homeowner's insurance to escrow property taxes and interest that covers the time you take over as homeowner to when you will make your first full interest payment.

While these are the most common fees that will generally make up your total closing costs, not every buyer will pay every fee listed. You'll typically get an estimate of closing costs soon after you apply for a mortgage, and exact costs prior to closing. Buying a home is a major transaction, and there are several factors that affect the cost beyond the selling price of the home. That's why it's important to carefully consider how much house you can afford before you start your search.

Dallas-Fort Worth apartment renters just can't catch a break.

In January, effective rents in the area were more than 5 percent higher than a year ago, according to a new report from Axiometrics Inc.

The rent hikes in the Fort Worth area were even larger - 6.4 percent on an annualized basis.

"What's amazing about these figures is that they're occurring with a continued stream of new supply," Stephanie McCleskey, Axiometrics vice president of research, said in the report. "These numbers speak to the continued strong job growth throughout the Dallas-Fort Worth metro."

The D-FW area led the country last year with almost 140,000 new jobs - a record annual employment gain for North Texas. And population in the area is rising more than 100,000 a year. That's fueled demand for apartments. Renters are paying dearly to keep a roof over their head.

In the Dallas area, average rents were just under $1,000 a month, according to Axiometrics. In Fort Worth, renters are paying an average of $891.70. Those are record highs for both markets. Only about 5 percent of apartments in North Texas are vacant.

Almost 13,000 new apartments opened their doors in the D-FW area last year, according to Axiometrics. And another 15,901 rental units are scheduled for completion this year.

"Given the bump up in supply, we'll likely continue to see rent growth and occupancy moderate, as both metropolitan districts absorb the new units," McCleskey said.

Dallas' rent increases are less than other major U.S. markets, including San Francisco, up 12.5 percent, Denver, 11.7 percent, and Atlanta, 8 percent.

Nationwide effective annual rents were 4.9 percent higher in January, according to Axiometrics.

We all know that going out can be expensive, but it is possible to have a date on a budget. Whether you are meeting someone for the first time or looking for a new and different experience with an established partner, you are probably looking for an idea other than making dinner at home and watching Netflix. Get out of the house with these cheap date ideas that don't skimp on romance.

1. Early Movies

Whether there are discount days or just cheaper tickets available for the earlier shows, you can often see the same movies available later in the day for less money. You can turn it into coffee and a movie or a movie and lunch instead of dinner and a movie.

2. Happy Hours

Almost every bar offers discounted drinks during certain times of the day. Take your date to your local favorite or try a new spot - these usually last two to three hours so try to hit it at the start. Another option is to go to restaurants that allow you to bring your own alcohol. BYOB places will often charge a corking fee to open your wine for you but this is usually lower than the markup for wine bought at a restaurant.

3. Sunday Museum Visits or Gallery Tours

If you are trying to get some art in your life, look up when museums have free hours, often on Sundays or off times. See world-class pieces for free or at a big discount. You can also search for nearby galleries with free exhibitions to check out some lesser-known cultural experiences.

4. Live Music & Readings

You don't have to pay hefty ticket prices to see live music or catch readings and speeches. Find a coffeehouse or bar that has free features like this and check it out. Even if you don't love it, you didn't lose anything and can feel free to leave at any time. Another good option is looking at what local colleges or universities are sponsoring. Sometimes they have events, lectures or performances that are open to the public for free or at a low ticket price.