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Refinancing Your California Home in 2020: Five Things to Know

Is now a good time to refinance a home in California? For many homeowners across the Golden State, the answer is yes!

Mortgage rates are hovering near historic lows, and home prices have risen over the past year. So 2020 might be a great time to refinance a house in California, depending on the situation.

Why 2020 Is a Good Time to Refinance in California

Do you own a home in California with an existing mortgage loan in place? Did you take out your current mortgage when interest rates were higher than they are now?

If you answered yes to these questions, 2020 might be a good time to refinance your California home. Thousands of Californians have done so already, and they’re now enjoying lower rates and payments.

According to the Mortgage Bankers Association (MBA), home refinancing activity has surged in recent weeks. This is largely due to a drop in mortgage rates that occurred in March 2020. Homeowners nationwide are now rushing to take advantage.

In mid-April 2020, the MBA reported that its “Refinance Index” (a measure of refinancing loan application volume) was 192% higher than the same week a year earlier. That’s a tremendous increase, and it was driven by a sharp drop in interest rates.

So, is now a good time to refinance your California home? It might be. Depending on your situation, you could potentially lower your rate and save a lot of money over time.

Here are five things you should know about refinancing a home in California, as of spring 2020.

1. Mortgage rates are low and expected to remain that way for a while.

Earlier this year, the average rate for a 30-year fixed mortgage loan dropped below the 3.5% threshold. It has been hovering in that range for a while now. This was partly due to the Federal Reserve’s decision to lower the federal funds rate used for interbank transfers, as a stimulus measure.

These trends make it a good time to refinance in California, for many homeowners across the state. That’s why we have seen a surge in refinancing activity.

According to an April 16 statement from the research team at Freddie Mac:

“Mortgage rates continue to hover near all-time lows for the third straight week. As a result, refinance activity remains high, but home purchase demand is weak due to economic tightening.”

Mortgage rates through mid April
Chart: Average 30-year mortgage rates. | Source: Freddie Mac PMMS.

The chart above is based on the weekly mortgage rate survey conducted by Freddie Mac. As you can see, the average rate for a 30-year fixed home loan is much lower now (right side) than it was at the start of 2020 (left side).

2. For many homeowners, now is a great time to refinance.

For many homeowners across California, now could be a great time to refinance a mortgage. We just talked about the most compelling reason for this. Rates are currently hovering near an all-time low, giving borrowers a chance to capitalize.

But that’s not the only reason. Home values in California have risen over the past few years. This gives homeowners more equity to work with.

According to Joel Kan, head of economic forecasting for the Mortgage Bankers Association: “Refinancing will continue to be beneficial for the many borrowers able to lower their monthly payments during this time of economic distress.”

3. Your home could be worth more now than when you first bought it.

Home prices in California rose steadily from 2012 to early 2020. That trend could slow over the coming months, due to the public health crisis and economic turmoil it has caused. But even so, many homeowners in California now have more equity in their homes than they did a few years ago.

In a typical refinancing scenario, homeowners need a certain amount of equity to qualify for the loan. The steady rise in house values over the past eight years has put a lot of California homeowners in a position where they can benefit from refinancing in 2020.

Related: Home prices during past recessions

4. It can be done remotely / online, without face-to-face contact.

Here’s something that might come as a pleasant surprise. The mortgage refinancing process is virtually paperless these days. So there’s really no need for face-to-face contact. That’s a big plus, given the current public-health situation we are dealing with.

The mortgage and real estate industries have been moving toward a more digital, paperless experience for years. The coronavirus pandemic has accelerated those efforts.

In 2020, you can refinance a home in California with an electronic document-signing process that is virtually “touchless.”

Home appraisers have also modified their assessment procedures, using desktop and drive-by appraisals instead of entering the home.

5. A housing market recovery is expected later in 2020.

There’s no denying the California real estate market has slowed down since the pandemic took root. It could slow even more over the coming weeks. But deals are still be conducted.

Javier Vivas, director of economic research for Realtor.com, thinks we’ll have either a V-shaped or U-shaped recovery scenario. In both scenarios, there would be a slowdown in real estate market activity in 2020, followed by a recovery period later this year.

Similarly, Freddie Mac’s chief economist Sam Khater recently wrote:

“Although the uncertainty of the crisis means forecasts of economic activity are more unclear than usual, we expect that most of the economic damage from the virus will be contained to the first half of the year. Going forward, we should see a recovery starting in the second half of 2020…”

The point is, our current real estate and economic woes won’t last forever. They’re temporary. Mortgage refinancing, on the other hand, is a long-term strategy for saving money. And the potential is still there.

Get a rate quote today! Is 2020 a good time to refinance your home in California? Let’s find out. We can run the numbers to determine if refinancing will work to your advantage. Contact us today.

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