If you think 2020 hasn’t been full of much good news, we do have some actual good news for just about everybody who is reading this. The amount available to homeowners to borrow against their house hit a record high of $6.5 trillion earlier this year. Additionally, 9 in 10 homeowners currently have a primary rate at least 0.75 percent above the prevailing market average rate as mortgage interest rates continue to hit record lows. If that isn’t good news, then we don’t know what is!
The “tappable equity” in a house is the amount of money you can have in cash before reaching a maximum combined loan-to-value (LTV) ratio of 80%, which is the cap in a “cash-out” refinance. The majority of the refinances in 2020 have been “rate-and-term” refinances, in which when the rate and the program (ex. 30-year fixed) of the transaction are financed and changed, rather than a cash-out refinance in which the borrower receives cash in addition to the potential rate and program change.
Now, despite mortgage lending being at a 7-year high due to low interest rates, both the number of cash-out refinances and the volume of equity withdrawn via such loans actually fell to close the first half of the year. Rate lock data, which indicates lending activity, suggests the trend is likely to continue, as the cash-out share of refinance activity continues to fall into the third quarter. Because of low rates and dropping refinance activity, borrowers should know that now is an excellent time to get a low interest rate, versus a personal loan or auto loan.
Mortgage rates have also continued to fall, dropping .125 percent from June to July according to Freddie Mac’s Primary Mortgage Market Survey. This means that the lending environment is beneficial for all types of transactions, refinances and purchases alike. Refinance candidates, in particular, could save an average of $300 per month on their mortgage payment.
At RPM Mortgage, we offer great rates for buying the home of your dreams or refinancing your current mortgage. Reach out to a member of our team to learn more!