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Feeling Left Out of the Housing Market Boom? Why Refinancing Your Current Home May be a Better Option
buying-a-home | Read Time: 3 minutes
By Jeffrey M. Ruben | Published: August 2021

With record low interest rates and an eagerness among Americans to buy homes with more space as they adjusted to the COVID-19 pandemic’s impacts on daily life, the U.S. housing market has experienced a boom over the past year that we have not seen in quite some time.
Unfortunately, when supply and demand tilts as heavily toward demand as this market has, there will be many home seekers feeling left out, unable to find a new home within their price range (or frustratingly outbid multiple times) despite being able to sell their current home for well above its previous value.
The question is not whether a homeowner can sell their house. It’s become a question of where they can go if they do.
For homeowners feeling this market crunch, now is a great time to refinance their current home. Here’s why.
Rates Are Still Very Low
Interest rates for refinances continue to be low, and for some homeowners could now be even lower, thanks to a recent elimination of a refinance fee charged by the Federal Housing Finance Agency. Effective August 1, this change may enable you to get a much better rate than you are currently paying.
With a lower rate and monthly payment, you can boost your savings even more to be ready for when the market settles if you are still interested in a new home when that time comes.
With housing inventory still an issue, now is a great time to take advantage of these lower rates for the short-and-long term.
You Can Refinance to Renovate
There are many refinancing options available for your current home, so talk to your trusted mortgage advisor about options or shop around to see what is out there that works best for you. A mortgage refinance can free up cash to receive in a lump sum for a renovation that meets your current living needs.
Another option is to save the monthly difference in your mortgage payment and wait out the current costs of lumber and the shortage of available remodeling professionals available, having even more spending power at your disposal later.
And if your renovation ends up being a major project, you can apply those monthly mortgage savings to a Home Equity Line of Credit (HELOC) or Home Equity Loan, capitalizing on the increased value of your home with a higher amount of equity to work with.
You Might Be Better Off Pocketing Your Extra Cash For Now
Lost in a lot of the frenzy for new homes is that the trifecta of low rates, low inventory and bidding wars have driven sale prices through the roof, but the sale prices and appraisal prices are seeing significant gaps. A lender is only going to give you enough money to finance the appraised value, not what you agree to pay.
If you win a bidding war for a new home at a sale price of $500,000 and the appraisal values the home at $400,000, you need to come up with $100,000 in cash – in a hurry – to close the deal.
Holding onto your extra cash during this period of volatility may be the prudent move, especially if you can refinance your current home and start adding to those reserves for later.
No matter which direction you go with the money saved by refinancing your home, you will be in a better financial position to compete for homes when inventory levels start rising again, or be very well positioned to make your current house the home of your dreams.
About the Author – Jeffrey M. Ruben
Jeffrey M. Ruben joined WSFS through its acquisition of Array Financial, a full-service mortgage banking organization, and Arrow Land Transfer in August 2013. Jeff formed Array and Arrow in 2005, having previously held senior executive roles at financial and legal institutions.
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