COLUMBUS, Ohio — Americans desperate for cash during the coronavirus crisis might be turning to a familiar place: their home.
Mortgage refinances have jumped this year, driven in part by homeowners pulling cash out of their homes or trying to cut their monthly expenses.
Unemployed homeowners, however, who might be most in need of the cash, will find it hard to qualify for a new loan.
Refinance applications rose 26% this week over last and are up 168% over last year, according to figures released Wednesday by the Mortgage Bankers Association.
Refinances accounted for 76% of all mortgage applications, according to the MBA.
The online loan service LendingTree reported a similar jump in activity, including in Columbus and throughout Ohio.
During the last full week of March, mortgage refinancing applications were up 105% in Ohio compared to the same week last year, while in the Columbus area, refinances were up 170%.
The main driver of refinancing activity has been a big drop in mortgage rates. The average 30-year rate fell to 3.33% this week, down from 4.08% a year earlier, according to Freddie Mac.
But experts say the nation’s economic crisis, coupled with record-high home equity, is also fueling demand.
“There’s a lot of incentives now to refinance because of the rates,” said Tendayi Kapfidze, chief economist at LendingTree.
“At the same time, because we now have this economic uncertainty, a lot of people want to access the cash they have available in their homes to have a buffer.”
Even those who don’t take cash out of their home might still be looking to refinance during the crisis, noted Joel Kan, an economist at the Mortgage Bankers Association.
“Even just a regular refi will benefit a lot of borrowers now,” he said. “We are looking for rates to stay low the rest of the year, even into next year. Our forecast is for 30-year rates to stay around 3.5% for the next few years.”
The Mortgage Bankers Association estimates that $1.2 trillion in mortgages will be refinanced this year, the most since 2012.
Daniel Prond, president of the Columbus Mortgage Bankers Association, said there has been “unprecedented” interest in refinancing this year.
“Consumers need to be patient; there has just been a flood of request on information relative to refinancing,” he said.
Homeowners who waited until they lost their job to refinance, however, could be in for bad news. Without any current income, they’re unlikely to qualify for refinancing, no matter how much equity they have in their home.
“If you can’t demonstrate income, you can’t get to the equity in your house,” Prond said.
Those afraid of what lies ahead might want to consider opening a home equity line, he suggested.
“Having a home equity line in place for the future is sometimes a good idea, if one or two wage earners in the house were to lose that income,” he said.