A new report from CoreLogic reveals that homeowners with mortgages saw their equity rise by a staggering $1.3 trillion in the second quarter of 2024, bringing total net equity to $17.6 trillion. While the average homeowner’s equity grew by $25,000 year-over-year, this figure was slightly down from the $28,000 increase recorded in the first quarter.
According to Dr. Selma Hepp, chief economist for CoreLogic, the steady growth in home equity offers many homeowners a financial lifeline in uncertain economic times. Rising costs, including homeowners’ insurance and taxes, have led some to tap into their equity to avoid falling behind on mortgage payments.
But is tapping into that equity through refinancing the right move now? Here’s how to work with your clients to best determine if refinancing or potentially selling and buying might be the right move.
Assess Interest Rate Trends
Interest rates play a major role in refinancing decisions. When rates drop significantly, homeowners may have the opportunity to lower their monthly payments or switch from an adjustable-rate mortgage (ARM) to a fixed-rate option. As an agent, staying updated on market trends and working closely with mortgage professionals can give you insights to help clients time their refinancing correctly.
Encourage clients to compare their current mortgage rate with available options to estimate potential savings. Even a 0.5% rate reduction can make a big difference over the life of the loan.
Evaluate Home Equity
The amount of equity a homeowner has built up influences not just their refinancing options but also the terms they can secure. For clients with substantial equity, refinancing might unlock better interest rates or allow access to cash through a cash-out refinance.
You can help your clients understand how refinancing could impact their loan-to-value (LTV) ratio and whether a cash-out option aligns with their financial goals. Refinancing could also eliminate private mortgage insurance (PMI) if the client’s equity has grown beyond 20%.
Align with Long-Term Financial Goals
Refinancing isn’t just about chasing lower rates—it’s about achieving financial stability. Help your clients assess their long-term objectives. Are they planning to stay in the home for many years? If so, the savings from refinancing could be worth the closing costs. On the other hand, if they plan to sell soon, a refinance may not provide enough short-term benefit to justify the expense.
A switch to a shorter loan term, like moving from a 30-year mortgage to a 15-year term, could also help them pay off their home faster and reduce overall interest.
Collaborate with Mortgage Professionals
While real estate agents aren’t expected to be mortgage experts, having trusted lending partners, like Mutual of Omaha Mortgage, can streamline the refinancing process for your clients. Collaborating with mortgage professionals allows you to connect clients with personalized advice, up-to-date loan products, and pre-qualification assistance.
Helping homeowners decide if refinancing is the right move can build trust and deepen your relationships with clients. By staying informed on market conditions, understanding equity considerations, and aligning financial goals, you can position yourself as a valuable advisor throughout their homeownership journey. With the support of lending partners like Keller Home Loans, guiding your clients toward smart refinancing decisions has never been easier.
