Interest rates have gone up substantially since the presidential election, and even more so recently, but there are some reasons why people may want to refinance:

  1. Cash debt elimination. Property values have increased in certain markets by as much as 10% per year over the last couple years, one thing I’m seeing more and more people do as far as refinancing is taking cash out to eliminate their debt. They may be extending their term or increasing their mortgage balance, but they’re rolling in and paying off some of their higher interest rate, credit cards, or installment loans—effectively saving them thousands in interest payments on those credit cards.
  2. Combining a first and second mortgage. Under the new proposed tax plan for 2018, one of the only deductions most people are going to have (unless they’re self-employed) is their mortgage interest paid deduction. The mortgage interest paid deduction has been eliminated for second mortgages, so we’ve seen a lot of people combining their first and second mortgages now that they’re in the equity position to do so. As a result, they’re increasing their mortgage interest paid deduction on their first mortgage and not leaving any deductions on the table by keeping that second mortgage.
  3. Reduction in term. We did just come out of a pretty big recession that lasted many years; a lot of people did a 30-year mortgage to keep their payments affordable so they could stay afloat in their homes and their lives. As the economy is stabilizing, they’re making a bit more money, and we’re noticing some people refinancing to reduce their loan term from a 30-year to a 15-year. In many cases, a lower term means higher mortgage payments, though it might not in some instances, depending on the interest rate they’re currently paying on their first mortgage. In any case, they’re looking to have their home paid off before retirement.

“We’ve seen a lot of people combining their first and second mortgages now that they’re in the equity position to do so.”

If you or someone you know has any questions about no-cash-out refinances or cash-out refinances, please don’t hesitate to reach out to me or my team. We’d love to speak with you.