Five million homeowners could benefit from refinancing

Although interest rates have been at record lows for the last several years, a vast number of borrowers are yet to take action by refinancing their mortgages to enjoy cheaper monthly rates, CNBC News reports.

A new report from Black Knight Financial Services says up to five million borrowers could benefit. With rates falling below four percent, around 2.4 million borrowers could save up to $200 or more each month on their mortgage payments. In addition, another 1.9 million borrowers could save between $100 and $200.

"If rates go up 50 basis points from where they are now, 2.1 million borrowers will fall out of the running,” said Ben Graboske, senior vice president at Black Knight Data & Analytics. “A 100-basis-point increase would eliminate another million, leaving only 2 million potential refinance candidates, the lowest population of refinance candidates in recent history.”

The message, it seems, is that borrowers who want to save on their mortgages will need to move quickly, because most industry experts are predicting mortgage rates to increase soon.

Although many homeowners have generally gained more equity in the last year due to rising home prices, not everyone has benefited. But for those who don't, there's a government sponsored refinance program called HARP that they can take advantage of. It's designed for those who's mortgages are backed by Fannie Mae, Freddie Mac or the FHA, and available to those who still owe more on their loans than what the property is worth. According to Black Knight, some 430,000 borrowers could be eligible for HARP.

The downside of refinancing is that it resets your debt counter back to 30 years, which may be off-putting for some homeowners despite the savings they can make on their monthly payments. But homeowners can also utilize the monthly savings to build equity faster, or pay off their mortgage sooner, if that's the goal. Certainly, they'll gain more flexibility through refinancing.

Black Knight also said it expects to see more homeowners taking advantage of home equity lines of credit, or HELOCs. The popularity of HELOC's has risen by 35 percent in the last year, with around 37 million borrowers being able to pull out an average of $112,000 from their mortgaged properties.