Here’s Why Millennials Are Rushing to Refinance Their Homes

The latest data from the Ellie Mae Millennial Tracker revealed that mortgage refinances accounted for 45% of all millennial loans for November. That’s a 14% increase year over year for November and a 3% bump from October alone. 

Ellie Mae divides millennials into two subgroups — older millennials (30-40 years old) and younger millennials (21-29 years old). Older millennial refinance activity hit 52% for November, which was more than double the percentage (24%) of younger millennials. 

With refinance interest rates hanging around 2.75% for both 20- and 30-year fixed and 2.125% for 15-year fixed mortgages, it’s not surprising that so many millennials are jumping at the chance to lower their monthly payments. These historically low interest rates might have you thinking: is now the time to refinance my mortgage? Maybe. Here’s what you need to know before you rush into refinancing your mortgage. 

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The process is easier than ever, for some.

With all income requirements aside, refinancing your mortgage has never been easier. Advances in technology coupled with the coronavirus pandemic, have resulted in a shift to online lending. Not only will you compare rates and apply online, but you’ll complete much of the process right from your home. Your appraisal and closing paperwork still will be completed in person. The huge surge in mortgage activity has increased your time-to-close by two days, though the seamless online portal with your lender is worth the trade-off. 

[ Read: Refinance Mortgage Calculator – How Much Can You Save by Refinancing? ]

Although the steps in the process are easier to complete, not every person is able to refinance. Additional restrictions and regulations have been put in place in response to the pandemic, making it harder for low-credit borrowers to get approved. Multiple job verification steps have been added to confirm your source of income right up until close. If you get laid off during the process, you’ll likely have to reapply at a later date.

In this article

    What you need to consider before refinancing

    If you can knock a percentage point off your interest rate, refinancing is probably a good fit for you. It’s a way to cut down on your monthly payment, build more equity and pay off your house faster. But even with all these benefits, choosing to refinance your mortgage is not a simple process. Before you rush into securing a lower rate, there are some things you need to consider.

    To start, you need to weigh the fees you pay to close against the money you save by refinancing. Generally, closing costs run between 3% and 6% of your principal. As of December 2020, if your mortgage is over $125,000, you’ll also be subject to an additional 0.5% “adverse market fee”. So refinancing your mortgage may be easier than ever to do, but it also will cost more.

     [ Read: How to Offset the New Mortgage Refinance Fees ]

    To put that into perspective, if your mortgage is $150,000, the average closing costs you would expect to pay will be between $4,500 and $9,000. Some lenders offer borrowers the option to roll their closing costs into their mortgage, though not all offer this. 

    You need to know precisely how many months it will take your savings to offset how much you spend in closing. Once you’ve got that figured out, think about how long you’re planning to live in your home. If your plan is to sell before you break even, you’ll lose money on your refinance.

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    Image credit: Morsa Images/ Getty Images

    Taylor Leamey

    Personal Finance Reporter

    Taylor Leamey is a personal finance reporter at The Simple Dollar who specializes in personal loans, student loans, mortgages, renters, and financial policy. Her reporting has also been featured at,,,, and elsewhere.

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    • Andrea Perez
      Andrea Perez
      Personal Finance Editor

      Andrea Perez is an editor at The Simple Dollar who leads our news and opinion coverage. She specializes in financial policy, banking, and investing.