The average mortgage consumer almost never expects lower rates. According to Fannie Mae’s monthly National Housing Survey, consumers are not very good at predicting when rates will rise or drop.

Fannie Mae polls 1,000 U.S. consumers at random each month to determine overall sentiment about the housing industry and economy. One of the questions the agency asks is whether mortgage rates will rise or fall over the following 12 months.

96% of consumers misjudge the market

Data going back to 2010 indicates that 80-90% of consumers typically predict higher or similar rates on the horizon. It is rare if more than ten percent of consumers think lower rates are coming.

But that’s exactly what’s happening now. A year ago in February 2014, a whopping 89% of consumers thought rates would rise or stay the same in one year’s time. Just 4% said mortgage rates would drop. The remaining 7% did not even venture a guess.

The data suggest that consumers rarely plan on lower rates. Most assume the rate they have now will be the same in 30 years as their loan is coming to an end. The truth is that most people keep their mortgages less than seven years.

Part of the reason is real estate churn. People have to move or sell their home for another reason, then buy a home in another area.

A more often occurrence is that mortgage rates unexpectedly drop. Even those with mortgages just a year old can’t resist the newfound savings.

Unplanned refinances can pay off

Homeowners are reluctant to pull the trigger on a refinance when they just purchased or refinanced a year or two ago. It is understandable. There are costs involved, plus the applicant may have to provide a few documents.

But a refinance can really pay off when 30-year rates hit the 3s. In early 2014, rates hovered around 4.3%. The latest Freddie Mac average rate is 3.59%. A borrower with $250,000 could save over $1,700 per year with a refinance.

That’s $12,000 over the seven-year average life span of a mortgage. Even after paying for closing costs, it’s very easy for a refinance to pencil out.

Lender-paid closing costs make the decision to refinance easier

But not every refinance comes with closing costs that the borrower has to pay. Rates are so low that lenders are giving applicants low rates and paying their closing costs too.

Mortgage lenders receive thousands of dollars when they sell the loan after closing. And, they are limited to how much they can make on a loan. Lenders can give you an interest rate that yields a slightly higher profit, and the must use the extra money to pay your closing costs. The interest rate you receive could be slightly higher than market rates, but still much lower than your current rate.

The result is often a zero out-of-pocket closing cost loan.

When the borrower drops his or her rate without having to pay the fees in cash, refinancing again starts to make a whole lot of sense.

Low-doc mortgages help homeowners take advantage of unexpectedly low rates

There are two refinance programs that require almost no documentation whatsoever. Fear of providing loan paperwork should not be a deterrent for homeowners who qualify.

The FHA streamline refinance is for homeowners with an FHA mortgage who want to drop their rate and payment quickly. Homeowners who bought or refinanced their home at least seven months ago can apply.

This refinance does not require income documentation and is very lenient when it comes to credit standards. Even homeowners who have had one late mortgage payment in the past year can qualify.

Likewise, the VA streamline refinance is a great option for those who have recently finalized a mortgage transaction. VA mortgage holders can refinance with no income or asset documentation. And, there’s a VA streamline does not count as a subsequent use of the VA loan benefit. The upfront funding fee stays at 0.50% instead of the 3.3% required when opening a new VA loan to buy a home.