More California Homeowners Are Refinancing, Heading Into 2018

A recent report by a mortgage industry group revealed that a higher number of homeowners in California and nationwide are refinancing their mortgage loans.

Will 2018 be a good time for you to refinance your home in California? That depends on where you stand right now, in terms of your mortgage rate and equity level. Here’s an updated look at interest rates, home price trends, and other factors that could help you answer this question.

California Mortgage Refinancing Activity Rises, Going Into 2018

A couple of days ago, the Mortgage Bankers Association (MBA) published its latest weekly survey of loan applications nationwide. The report covered the week ending December 15, 2017. This long-running survey gives borrowers and lenders some useful insight into mortgage financing trends, such as loan volume and interest rates.

The industry group’s most recent survey showed a surprising trend related to California mortgage refinance activity. Apparently, more and more homeowners across California are refinancing their homes, as we approach 2018.

The refinance share of total loan applications rose to 53.9% in the most recent MBA survey. That means more loan applications were submitted by homeowners (seeking a refi) than by home buyers. That was the highest percentage of refinance applications since December of 2016.

Apparently, a lot of homeowners in California feel that now is a good time to refinance, as we finish the year and move into 2018. But why? There are two main factors that have contributed to this trend — (1) rising home prices and equity, and (2) low rates.

1. Rising equity — House values across California have risen over the last few years, largely due to an imbalance between supply and demand. The research team at Zillow, for examples, recently reported that the state’s median home value rose by 7.8% during the 12 months ending in November 2017. This means that many California homeowners are enjoying higher levels of home equity, which could put them in a good position to refinance their mortgages. (Equity is usually a refinancing requirement.)

2. Low rates — There’s a second reason why it might make sense to refinance a home in California in early 2018, and it has to do with mortgage rates. Long-term loan rates have been hovering around 4%, on average, for many weeks now. This is based on the weekly survey conducted by Freddie Mac. In their latest survey, for the week ending December 21, the average rate for a 30-year fixed mortgage loan was 3.94%. This too could be contributing to the rise in mortgage refinancing in California and nationwide. But it might not last — experts are predicting a rise in rates during 2018.

Both of these factors (rising home values and relatively low mortgage rates) could make it a good time to refinance a home in California, as we head into 2018.

Is Now a Good Time to Refinance Your Home?

The big question: Will 2018 be a good time for you to refinance your mortgage loan?

That depends on several factors, including your current mortgage rate, the amount of equity you have, and your overall financing goals. We can help you evaluate these factors to determine if refinancing makes sense in 2018.

Homeowners use refinance loans for different reasons. Some do it to shorten their repayment term, or to convert some of their home’s equity into cash. But the most common reason is to secure a lower interest rate, thereby reducing the monthly payments.

And that’s where the “break-even point” comes into the picture. The break-even is the point beyond which the money you save (with a lower rate) begins to surpass the amount paid in closing costs.