How Could 30% of All Mortgage Transactions Be Refinances?

Numbers recently came out showing that 30% of mortgage applications are from refinances. It has me asking: how in the world is this possible? Who is refinancing right now?

The interesting thing is that we mostly think about refinancing to improve interest rates or shorten the term for amortization. The goal is to put the homeowner in a better position, so in the long-run it makes more sense financially.

But, the reality is that we are doing almost none of these right now. Most homeowners don’t want to refinance because they want to keep the low interest rates they locked in a few years ago.

Other Reasons Why It Makes Sense to Refinance

But, remember that there are so many other reasons why people need to refinance:

• Separating Households: For whatever reason, two partners need to separate the mortgage. Divorce is a good example. One partner might be buying out the other.
• Passing of a Parent: If the house is part of an estate plan and the person passes away, then it might be handed down to heirs and need to be refinanced in this situation.
• Renovations or Investments: Someone might buy a property, then later decide that renovations are needed. So, they refinance to pull cash from the equity to pay for these construction services. Or, they could pull this equity and decide to re-invest the money into another property or an ADU on their property.

It’s also important to note that around 30% of home purchases are cash deals right now. Since so many of these transactions are going through without mortgages, it definitely influences the ratios of mortgages for home purchases vs. refinancing.

Refinancing Is Always a Possibility

On the surface, it seems counter-intuitive that anyone would be refinancing right now. But it turns out that there are always reasons people are going to need to refinance. It’s still a large percentage of the market most of the time.

So, if you need help refinancing, or you have a lot of equity and want to explore other options for using this cash, reach out! I’m always here to help you find the best financial and mortgage solutions for your unique needs.