SmartAsset, which has a neat mortgage refinance calculator tool on its web site, set out to find out which states are home to people who refinance their mortgages the most. Here’s what it found:
SmartAsset compared the number of refinances in a metro area to the number of new mortgages for home purchases. To rank the metro areas, it created a refinance-to-mortgage ratio. This ratio is equivalent to the number of refinances in a metro area divided by the number of new mortgages in a metro area.
Findings:
● California homeowners refinance the most – The most striking pattern to emerge from our analysis was the prevalence of refinancing among California homeowners. California metro areas take all of the top 14 spots. In fact, outside of California, no metro area has a refinance-to-mortgage ratio above 2. In one metro area, San Rafael, the number of refinances exceeded the number of mortgages by three times. One potential reason why California residents may refinance more often than others is high local housing costs. Almost 50% of California homeowners have a home worth four or more times their income, according to U.S. Census Bureau data, and 41% of mortgaged homeowners spend over 30% of their income on housing. California homeowners may be refinancing to get better mortgage rates to lower their monthly housing cost.
● Texas homeowners refinance the least – The metro areas where homeowners were least likely to refinance were clustered in Texas. Five of the 10 metros with the smallest refinance-to-mortgage ratio were in the state, including Beaumont-Port Arthur, Wichita Falls, College Station-Bryan, Midland and Lubbock. Compared to California, only 27% of mortgaged homeowners in Texas are housing cost-burdened (i.e. pay more than 30% of their income toward housing costs) and only 14% of Texas homeowners have a home worth four or more times their income.
● Refinancers take on less debt – As a general rule those who refinance take on less debt than those who buy a home, according to our data. Across all the metro areas in our analysis, the average refinancer had a refinance-to-income ratio of 1.93. Homebuyers taking out mortgages had a mortgage-to-income ratio of 2.31. In total, the average homebuyer in each metro area took out a mortgage worth 38% more of their income compared to refinancers.
● Homeowners who refinance tend to have more income – People who refinanced had an average income of $87,000 while homebuyers had an average income of $74,000. That trend reverses in cities with the most refinances, however. Across the top 25 cities in this study (the places where refinancing was most prevalent), homebuyers had 7% more income than refinancers, on average.
