Article By: Jim Porter – November 26, 2016
Refi-mania has happened many times in my career.
The first big one for me was in 1986 when mortgage rates dropped to 6 percent after getting as high as 14 percent earlier in the decade. The number of refinance loan applications overwhelmed the mortgage brokers and bankers at the time and loan applications took 90 to 120 days to close escrow.
Rates jumped from 6 percent to 8 percent in the middle of 1986 while millions of Americans were in the refinance process, which slowed down the numbers of new applications but the banks still had way more loans in their pipelines than they could handle. Many mortgage companies in America could not honor their 60-day rate locks that year because the loan applications took 90 to 120 days to underwrite and fund.
The next big Refi-mania occurred in 1992 and 1993 when rates dropped to 3.875 percent and ended quickly in early 1994 when rates went up to 5 percent or so.
The largest and longest running Refi-mania took place between 2000 and 2003. Many homeowners refinanced their homes two or three times during this run of luck for mortgage companies and consumers. Rates went up at the end of 2003 after three years of huge refinance volume and again ended quickly when borrowers could not find benefit from refinancing.
Brexit in June of this year caused the most recent Refi-mania and lasted until the Trump election. Since election day, mortgage rates that averaged 3.50 percent across America are now averaging over 4 percent, which is a huge increase in only two weeks but definitely not unprecedented in history.
The good news for homebuyers is that Refi-mania causes time delays for mortgage companies and appraisers and now that the average rate is up to over 4 percent the number of refinance applications has slowed significantly, freeing up loan officers and mortgage companies to provide faster service for Realtors and homebuyers to achieve the American Dream.
Refinancing has slowed but is definitely still an opportunity for many people.
With home values nearly doubling over the past 9 years, equity has returned and consumer confidence has improved. Many people are remodeling their homes and using their equity for the improvements through refinancing.
Veterans can refinance up to 100 percent of the current value and this is especially powerful for our veterans with a 10 percent or more service-connected disability because VA waives the VA funding fee, aka the VA guarantee fee.
FHA loans are also an effective way to refinance up to 97.75 percent of the home value for a rate and term refinance and 85 percent for cash out refinances.
One of the most popular reasons for refinancing and pulling cash out is to consolidate debts and pay off personal credit cards and auto loans or student loans. Most of the time a person can refinance into a 15-year fixed rate loan and after consolidating debts end up with a lower overall monthly payment than they had prior to the refinance.
Jim Porter, NMLS No. 276412, is the branch manager of Solano Mortgage, NMLS No. 1515497, a division of American Pacific Mortgage Corporation, NMLS No. 1850, licensed in California by the Department of Financial Protection and Innovation under the CRMLA / Equal Housing Opportunity. Jim can be reached at 707-449-4777.
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