If you are considering refinancing a property, there are a few significant things you need to do if you want the process to go smoothly and if you desire to get maximum benefits out of the loan restructure. I’m going to share with you what those strategies are shortly. But first, it is important that you understand some key trends about the market we’re in right now. This information will help you evaluate and leverage your bargaining power.
More than 2.5 million residential refinance mortgages were issued by lenders between January and March this year—the highest number in a single quarter since Q3 2003, according to a recent report by ATTOM Data Solutions. Among metros with a population greater than 200,000 that originated more than 1,000 total loans in Q1, nearly 79% saw increased refinancing activity.
Refinance Activity Surges Throughout U.S.
Refinances nationwide have more than doubled over the past year, with an uptick in overall mortgage lending activity that even sustained the cold-weather months. Residential property mortgages rose 3% between Q4 2020 and Q1 2021 to 3.77 million mortgages, a 71% increase from Q1 2020 and the highest level in more than 14 years.
“Homeowners lined up to refinance their loans in ever-growing numbers during the first quarter of 2021, making for a highly unusual quarterly increase in total lending activity for that time of year. The home-mortgage industry almost always slows down in winter, but not this year because of so many homeowners hopping on super-low interest rates to reduce their monthly payments,” said Todd Teta, chief product officer at ATTOM Data Solutions.
“Eventually, the refi side of the lending business will ease up after enough homeowners get in on the good deals. But there’s no sign of that happening in the very near future—yet another indicator of how the housing market remains strong amid uncertain economic times connected to the pandemic,” added Teta.
Where Homeowners Are Refinancing
Refinance lending accounted for the vast majority of mortgages originated in many areas of the country in early 2021. Per ATTOM’s report, refinance activity rose by at least 10% in over half (54%) of the 211 major metros included in its analysis.
Metro areas with a population of more than 200,000 and at least 1,000 total loans in Q1 that saw the largest surge in refis included:
- Jackson, MS (up 92.9%)
- Springfield, MA (up 59.5%)
- Medford, OR (up 57.3%)
- Buffalo, NY (up 55%)
- Macon, GA (up 53.3%)
Among cities with a population over 1 million, Buffalo (up 55%), Las Vegas (up 37.2%), Milwaukee (up 31.8%), Atlanta (up 31.3%), and Providence, RI (up 31.2%), led the charge.
In contrast, refinance mortgages decreased most in these medium-sized metros in Q1:
- Ann Arbor, MI (down 54.5%)
- Syracuse, NY (down 28.5%)
- Pittsburgh, PA (down 23.1%)
- Des Moines, IA (down 21.8%)
- Lubbock, TX (down 18.8%)
And these larger metros experienced the same: Houston (down 16.6%), St. Louis (down 14.6%), San Antonio (down 7.3%), and Washington, D.C. (down 5.8%).
Top 10 Refinance Lenders
According to ATTOM’s analysis, the following lenders accounted for the bulk of residential refinance mortgages originated between January and March this year:
- Quicken Loans: 294,682
- Freedom Mortgage: 102,814
- loanDepot: 79,075
- United Wholesale Mortgage: 76,457
- Wells Fargo: 63,501
- JPMorgan Chase: 47,594
- PennyMac: 42,039
- Guaranteed Rate: 36,587
- Caliber Home Loans: 36,008
- AmeriSave Mortgage: 32,592
Do or Die Strategies for BRRRR Investors
Successfully refinancing a rental property is an essential component of the BRRRR strategy—it’s also one of the trickiest. The best real estate investors go into new BRRRR deals with a refi plan in place, as opposed to reacting to challenges in the refi process in real-time as they unfold.
Prior to purchase, BRRRR investors should take care to ensure they personally can qualify for a refinancing loan, the property itself can qualify for a refi, and the terms of the new loan make sense for their investing timeline and financing needs. This is why it’s imperative to establish relationships with lenders. Consult a lending professional to proactively determine what is required of you in terms of your credit score, available reserves, and debt-to-income ratio. With regard to the property, ask for guidance related to the debt service coverage ratio and specifics related to the titling seasoning period.
The refinance process can be complicated, but it doesn’t have to be. BRRRR investors’ best bet is to network with their peers to find a lender that is investor-savvy. That way, you can work with lending professionals who are already accustomed to navigating the process and addressing common refi hiccups.