Empowered by Equity

June 9, 2021

It may be time to talk to homeowners about a cash out refinance.

The housing market is on fire and with low inventory and bidding wars, homebuyers are feeling the heat. It may be time to shift the conversation from home buying to empowering homeowners to use their equity and consider a cash out refinance.

Record numbers of families have already seized the opportunity to refinance. Refinances continue to drive mortgage lending across the United States, with total lending up 3% quarterly and refi activity up 12% during the year’s first three months, according to ATTOM Data Solutions. With the refi boom continuing in 2021, the quarterly increase in refi activity outpaced the drops in both purchase lending and home equity lines of credit (HELOCs). According to ATTOM’s data, lenders issued more than 2.5 million home refinance mortgages during the first quarter, the most since the third quarter of 2003; which means refinance lending has now more than doubled over the past year, rocketing 113% since the first quarter of 2020. 2

In addition to record-setting refi activity, many homeowners are looking to make a move. But home prices have increased 11.6% over the past year, which is the fastest YOY increase in the history of the Zillow Home Value Index, which goes back 25 years.1 Plus, the competition for limited inventory has been heightened in some areas by investors ripe with cash winning bids over individuals and families using any number of government loan programs.

The silver lining? Increasing home prices equate to increased equity for owners, and mortgage rates continue to hover near record lows.

With this in mind, now may be a great time to redirect the conversation with clients. Some who were initially pursuing a purchase, may now be ready to reconsider staying put and putting their equity to work for them.

– Millennials could use the cash out from a low-interest rate refinance to pay off student loans, or even make updates to their current home.

– Parents of college-bound kids could put their cash to work helping their children with education expenses.

– Empty nesters could use the equity from their primary residence to pick up a small 2nd home closer to their grown children and grandchildren.

Not only can homeowners make their cash work for them now, but they can possibly set themselves up for a future home purchase. The foreclosure moratorium will end, and more homes could become available. So, taking care of other financial obligations now, can set them up for home shopping success in a year or two.

Having the conversation about a cash-out refinance could help set them up to make smart use of their equity, depending on the needs of their family.

AFR Wholesale offers a wide variety of cash-out refinance programs.

Photography by [Malochka Mikalai] © Shutterstock.com

1 Zillow Home Value Index (https://www.zillow.com/home-values/)
2 Refinance Lending Continues Powering Unusually Strong Home-Mortgage Activity Across U.S.(https://www.prnewswire.com/news-releases/refinance-lending-continues-powering-unusually-strong-home-mortgage-activity-across-us-301304764.html

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