Refinancing is a powerful tool that allows real estate owners to secure lower interest rates, tap into home equity, or reduce the loan term of a mortgage. For homeowners looking to stay put and save money in the long run, refinancing at the right time can help build equity at a faster rate than before and help secure a strong financial future.
Today’s mortgage rates, thanks in large part to the COVID-19 pandemic, reached an all-time low average of 3.15% for 30-year fixed-rates and 2.62% for 15-year fixed-rates in May. Between generous government stimulus checks and a rush to save more money as the coronavirus continues to linger, today’s economic environment may present a prime opportunity for homeowners interested in refinancing to secure favorable terms.
Here are three refinance trends that are impacting today’s real estate markets:
The year of the refi
In the wake of economic uncertainty, applications for new home loans have hit their lowest levels since 2015. But that doesn’t mean the market for mortgages is drying up: The Mortgage Bankers Association forecasts that nearly half of the mortgage originations in 2020 will be refinanced mortgages. As demand remains constrained because homeowners continue to hold onto properties throughout the country, refinancing may stand out as a popular option for homeowners looking to take advantage of low interest rates.
Strict financial requirements
Refinancing has always required accurate, up-to-date financial information to help financial institutions make lending decisions. Due to today’s high demand for mortgage refinancing, many lenders are imposing higher credit standards and offering limited loan options in order to better handle the current economic downturn. Homeowners looking to refinance should have secure employment and strong financial health in order to secure a competitive rate.
In-home appraisal concerns, in some markets
The appraisal process is the essential step that ultimately determines a home’s true value before refinancing. But just like many other indoor activities that have been disrupted by COVID-19, the in-home visit from an outside appraiser, in some areas, has been met with resistance from homeowners and appraisers alike who are concerned with public health. Until it’s safe for appraisers to travel and inspect properties in person, appraisals may be deferred as an important and necessary precaution.