Refinance Mortgage Loans Hit Year High Due To Low Rates

Refinance Mortgage Loans Hit Year High Due To Low Rates

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article On Refinance Mortgage Loans Hit Year High Due To Low Rates

Refinance Mortgage Loans is the hottest thing right now.

  • Many mortgage companies are swamped with homeowners trying to refinance their current mortgage loans at lower rates
  • The breaking news the Central Bank lowering rates to zero percent drove mortgage rates at historic lows
  • With the combination of mortgage rates being at a 23 month low and the reduction of FHA annual mortgage insurance premium, all refinance mortgage programs are in major demand
  • Mortgage rates are now below 3.0% for prime borrowers on conventional loans
  • Freddie Mac and Fannie Mae define a prime borrower as a borrower with credit scores of 740 FICO credit scores and who have at least 80% loan to value
  • Still, whether you are a prime borrower or a borrower with lower credit scores, mortgage rates are low across the board where you may take advantage of these lower rates
  • Homeowners can benefit by refinancing your current home loan
  • Statistics released by Freddie Mac, homeowners who have refinanced their mortgage loans in 2019 will save about five billion in interest on their mortgage loans in the first year of their refinanced mortgage loans
  • A typical homeowner who refinances their home loans averages a 25% monthly savings

In this article, we will discuss and cover Refinance Mortgage Loans Hit Year High Due To Low Rates.

Low Mortgage Rates In 23 Months

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Per Freddie Mac Primary Mortgage Market Survey, also known as PMMS, the national average mortgage rates for a 30-year fixed-rate mortgage loan has been under 3.0% for the past 20 consecutive weeks.

  • Refinance mortgages are cyclical and when mortgage rates drop, the volume of refinance mortgage applications increase
  • As mortgage rates increase, the number of refinances drops
  • When mortgage rates really increase, refinances are at a standstill like we have experienced back in May 2013
  • According to national statistics by Freddie Mac, there were over 440,000 refinance mortgages on conventional loans last quarter
  • This number is an 11% spike in the number of refinance mortgages from the prior quarter and marks the second consecutive quarter of a double-digit increase in the refinance mortgage numbers
  • Mortgage rates on the average have dropped more than 75 basis points since the beginning of 2020
  • This type of drop can even benefit homeowners who purchased their homes in the past 12 months
  • Each individual case is different but every homeowner should get a free analysis from a loan officer to see if they can benefit from a refinance mortgage

Statistics announced by Ellie Mae revealed that refinance mortgage loans accounted for 40% of all closed mortgage loans a year ago. Today, all refinance mortgage loans account for 60% of all closed mortgage loans.

Refinance Mortgage Loan Programs

Conventional mortgages lenders have closed on more conventional refinance mortgage loans last quarter than any other quarter since 2019.

  • Its not just conventional refinance mortgage loans that had surprising increases in refinance mortgage loans
  • FHA loans, VA loans, and USDA refinance loans all have set record to refinance mortgage loan closings as well
  • With FHA, it was not just the drop in mortgage rates that spiked record number of FHA refinance mortgages
  • HUD lowering the annual FHA mortgage insurance premium from 1.35% to 0.85% has created a flood of homeowners refinancing their current loans
  • Even if the FHA mortgage rates were the same, the reduction of the FHA mortgage insurance premium was just enough to benefit the borrower

Homeowners need a net tangible benefit by law to be able to refinance their current home loan.

Rate And Term Refinance
Rate And Term Refinance

The majority of homeowners do a rate and term refinance mortgage when rates drop,

  • This is to lower their monthly mortgage payments and save thousands of dollars over the course of their mortgage loan term
  • Rate and term refinance mortgage is done by reducing the rate of reducing the term of the loan or the combination of both of these
  • If the homeowner gets a reduction of 200 basis points on their current home loan, that will be a reduction of a third of their payment

In order to be able to go through a refinance mortgage by law, the homeowner needs to have a net tangible benefit of at least 5% in the reduction of their monthly housing payment.

Refinance Mortgage From A 30 Year Term To 15 Year Term

Homeowners who are able to qualify for a 15 year fixed rate mortgage loan term can save tens of thousands of dollars.

  • 15 year fixed rate mortgages have lower mortgage rates than 30-year fixed-rate mortgages
  • By refinancing their 30 year fixed rate mortgages to 15-year fixed-rate mortgages, the homeowner can save almost 70% in mortgage interest over the life of their home loan

15-year mortgage rates are well under 3.0% today. Mortgage rates are expected to remain low for years to come.

Refinance FHA Loan To Conventional Loan And Eliminate FHA Mortgage Insurance

Homeowners with an FHA loan can eliminate the hefty FHA annual mortgage insurance premium by refinancing their current FHA loan into a conventional loan.

  • You still need to pay private mortgage insurance on a conventional loan if you have less than 20% equity in your home
  • But private mortgage insurance is much less than FHA mortgage insurance premium
  • Also, most conventional mortgage lenders offer LENDER PAID MORTGAGE INSURANCE
  • Lender Paid Mortgage Insurance is also referred to as LPMI

For a slightly higher rate, the borrower does not have to pay mortgage insurance.

Cash-Out Refinance Mortgage

Homeowners who purchased their homes starting in 2010, especially in California, Illinois, Florida, Indiana, Texas, most likely purchased their homes at rock bottom values

  • The chances are that their properties have appreciated double digits and have equity in their homes
  • Some areas in California, Florida, and Illinois have property values that increase over 40%
  • Homeowners with equity can do a cash-out refinance mortgage
  • FHA allows up to 80% loan to value on a cash-out refinance mortgage
  • Conventional cash-out refinance mortgage allows up to 80% loan to value

VA Loans allow up to 90% loan to value on cash-out refinance mortgages.

Streamline Refinance Mortgage

FHA, VA, and USDA permits streamline refinance mortgage where no income verification is required, no credit scores are required, and no appraisal is required.  Streamline Refinance Mortgages are very simple and streamlined where the only documents that are required are a copy of the mortgage note, most recent mortgage statement, copy of the declaration page of the homeowner’s insurance, and copies of drivers license and social security cards.  Two months bank statements will be required to see if the homeowner has sufficient funds to bring one-month mortgage payment to closing.  You get to skip one month of the mortgage payment.

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