More homeowners refinance as tax reform looms overhead

Aly J. Yale
The Mortgage Reports contributor

Refis on the rise

Homeowners are refinancing in droves. According to the recent Ellie Mae Origination Insight Report, refinances accounted for 40 percent of all closed loans in December. On just conventional loans, the refinance share was nearly half.

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From tax reform to refinance

Refinances and FHA loans rose one percentage point in December overall. Conventional refinances rose two percentage points.

Conventional refinance rates and guidelines for 2018

According to Jonathan Corr, president and CEO of Ellie Mae, the jump is likely due to the recently passed tax reform – which will change mortgage interest deduction limits for many homeowners.

“As we closed out 2017 we saw an increase in the percentage of refinances due to seasonality as fewer purchases take place in the fourth quarter, and likely homebuyers were taking advantage of the mortgage deductibility limit before it decreased to $750,000 on December 15th,” Corr said. “We probably can also attribute some of the increase in closing rates to last-minute efforts by borrowers to close loans before the tax changes took effect.”

Across all loan types, refinances have risen eight percentage points since June, though they’re still down slightly from 2016’s 46 percent share.

Verify your new rate (Feb 17th, 2019)

Faster and more efficient

It seems lenders are getting quicker and quicker at the draw. The Origination Insight Report showed the average number of days to close down was six full days over the year, hitting 44 for the month. On refinance loans, it decreased by nine days (to 41), and on purchase loans, it dropped two (to 46).

How long does it take to close on a house?

As for loan type, buyers largely preferred conventional loans, with 66 percent using these mortgages for their purchase. One-fifth used FHA loans, while 10 percent used VA lending. The average buyers FICO score last month was 722, holding steady from November’s numbers.

Get today’s mortgage rates

If you’re looking to refinance, signs indicate now might be the right time. Be sure to shop around, and see what mortgage rates you qualify for today.

Verify your new rate (Feb 17th, 2019)