Refinancing as Rates Rise

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Financing

Mortgage Rates Rise, Refinancing Rates Fall

As a homeowner, you are responsible for a variety of different things. Whether you are worrying about keeping the landscaping crisp, updating a bathroom or refinancing your home, there is always something to think about. As the cost of living in Orange County and in the rest of California continues to rise, homeowners are looking for ways to access finances.

Refinancing used to be a popular option, but refinancing applications have dropped from 72% of the mortgage-origination volume in 2012, to 35% in 2018, the lowest since 1995, according to the industry research group, Inside Mortgage Finance. If you are a homeowner that is deliberating between refinancing as interest rates rise or riding out the market, you need to decide if refinancing is right for you. Here are some insights to help you make your decision.

Refinancing in a Nutshell

Refinancing gives homeowners an accessible source of cash. Typically, homeowners consider refinancing loans like an Adjustable Rate Mortgage loan, which is considered a more dangerous loan, to a 15 or 30-year Fixed Rate Home Loan. It gives a homeowner a safer loan and lowers their monthly payment, putting more money in their pockets. There is also the option of borrowing against the value of the home through “cash out” refinancing, and using the equity of the home for necessary projects or expenses.

Should Everyone Refinance?

As mortgage rates rises, refinancing slows as this particular funding option becomes less and less viable for homeowners. Just this year, the 30-year fixed-rate mortgage has risen almost a half of a percent, from 3.95% to 4.45%. With rates rising and the market as competitive as ever, lenders are going to become more stringent about who they give loans to. This makes it even more important for you to consider all of the different types of loans that are available and if one makes sense for you and your particular situation.

Increased mortgage rates also affect refinancing because many homeowners already have rates that are lower than what lenders can offer, making fewer homeowners eligible for refinancing because of rising rates. Black Knight, a mortgage data and technology firm, found that the number of borrowers who could benefit from refinancing is down 37% from the end of last year, making this group of borrowers the smallest since 2008.

Refinancing isn’t for everyone. We have seen the lowest rates in history over the past ten or fifteen years that gave so many homeowners throughout the country an effective path to refinancing. But unfortunately, those rates are going back up, and the window for an effective refinancing seems to be closing.

What’s Next?

If you are looking to refinance your home, don’t wait much longer. If you need someone to help you weigh your options, or are considering purchasing a home, call me today at 949-500-9714.  I have more than 15 years or real estate market experience and would love to help you take your next steps as a homeowner, whatever they may be.