How are Forbes' 2020 Mortgage Trends Holding Up?

At the beginning of the year, the Forbes Real Estate Council put out a piece around their five mortgage trends likely to continue in 2020. It’s been a little more than one month of 2020, so how are these trends holding up so far?

Mortgage trends are always somewhat subjective, highly likely to vary based on other aspects of banking, finance and world economics. We can make all the predictions we want, but year after year, something tends to surprise us or change course.

That said, anticipating mortgage trends and having an idea of what we’ll face in the upcoming year as mortgage originators is never a bad idea. I think the list Forbes threw together is good, with one caveat – do consumers know?

Let me quickly share their top 5 trends with you:

1. Due to the recent decline in interest rates, we should continue to see traditional rate reductions by lenders.

Yes.

2. The popularity of cash-out refinancing will continue.

Yes. This was a big trend in the latter half of 2019, and most likely won’t be going anywhere in 2020.

3. Many homeowners will shorten the terms of their mortgages while reducing their interest rates, also known as mortgage recasting.

Many should.

4. Those who are able to will shed their private mortgage insurance (PMI).

Again, many should.

5. Smart borrowers will remain conservative, keeping the memories of 2008 in mind (in a healthy way).

I feel like this one could have been, and has been, written every year since 2008.

It’s hard to disagree with almost any of these, especially if you are an industry insider. But what if you’re not?

It’s numbers 3 and 4 that require insiders to adopt an outsider perspective. Mortgage customers should absolutely hope that shedding PMI and recasting are major trends, but many don’t even know they are possibilities!

[For us insiders, it’s our responsibility to educate our customers about all of their options, consistently delivering them the best bang for their buck. If we don’t educate them, they stand no chance of becoming major 2020 trends.]

So let’s educate.

For those who want to decrease their monthly payments, mortgage recasting could be a perfect solution – if they have a large lump sum available. Let’s say you win the lottery, start a new job and receive a hefty signing bonus, or your kid gets a full ride to college after you saved up – you might find yourself with some extra cash on your hands. 

In that case, or if you simply saved well, you might consider recasting your loan. This means refinancing your 30 year fixed to a lower rate 15 year fixed mortgage and making a lump sum payment at closing that will lower your new principal loan amount, and put the 15 year payment in line with (or actually less than) your 30 year amortized payment. Your interest rate and term will reduce, and because your principal has decreased, your monthly payments may actually be lower.

If you can afford to do this, you’ll save very significant amounts of money in the long run. So don’t just autopay that next mortgage statement – see if it’s within your financial means to recast. Ask your financial partners about this possibility sooner rather than later.

Another way to decrease your monthly payment this year is by shedding your private mortgage insurance (PMI) – if you have it to begin with.

If you put less than 20% down on your original down payment, you’ve probably been paying PMI each month, an additional monthly payment on top of your monthly mortgage payment. This offsets the risk to lenders, an extra layer of protection in case you default on your loan. 

After you’ve had your loan for a while, it may be possible to remove your PMI depending on changing financial circumstances. You won’t be told it’s eligible to cancel – you might not have even realized you were paying it until now. Speak to your lender to find out if it’s possible for you. At Paramount Bank, we prioritize letting our clients know when they might be able to remove their PMI. It’s just one added way that we are a financial partner, not just a bank.

If you would like to cancel your PMI but can’t yet, keep making your payments on time and resolve your debts. These actions will leave your lender confident that you are a reliable investment for them.

Overall, these trends for 2020 mortgaging from Forbes are par for the course. 

But let’s ask ourselves: If a tree falls in a forest, does it make a sound? Is a trend a trend if no one knows it exists?

Customers deserve a financial partner who is upfront about all of the mortgage options on the table. 

I hope this article helped to educate you on some of your possibilities to decrease your mortgage payment this year. If you’re able to recast or shed your PMI, this is definitely one time when you want to be “on trend.”