Equity Cash-Outs Lowest in 15 Years
Equity Cash-Outs Lowest in 15 Years
Equity Cash-Outs Lowest in 15 Years
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August 4, 2011 (Jeff Alan)

Falling home values have left home equity piggy-banks pretty empty as of late. According to a recent report by Freddie Mac, the total amount of cash that borrowers who refinanced their first-lien mortgages took out of their homes was less than 10 percent of the total amount of cash that they took out just five years ago.

The report found that 23 percent of all refinanced loans in the second quarter of 2011 were “cash-out” borrowers, those that increased their loan by at least five percent, with an estimated net dollars of home equity converted to cash estimated to be $7.5 billion.

That’s less than nine percent of the total amount that borrowers took from their homes compared to when cash-out refinance volume peaked in the second quarter of 2006 at $83.7 billion.

Combining the second quarter of 2011 with the first quarter of this year, which saw a similar level of refinance activity, and adjusting for inflation, the amount of equity cashed-out was at the lowest level since the second half of 1996.

Not only has the amount of home equity borrowers cashed-out decreased, so has the number of borrowers compared to previous years. The average percentage of cash-outs during the 1985-2010 period was 46 percent, today the amount is half of that.

Most homeowners who refinanced their first-lien home mortgage either maintained the same the same loan amount or lowered their principal by putting “cash-in.” Over half, 51 percent, maintained about the same loan amount while 26 percent of refinancing homeowners put cash in, reducing their principal.

For 30 year fixed rate mortgages, the median interest rate reduction was about 1 percentage point, a savings of over $1550 in interest payments in the first year of the loan with a principal of $200,000.

Frank Nothaft, Vice President and chief economist of Freddie Mac stated, “This is primarily a ‘rate-and-term’ market, meaning that the typical homeowner is looking to cut their interest rate or shorten their loan term. More than three-in-four borrowers are keeping their loan balance about the same or reducing their loan balance when they refinance.”

“Savvy homeowners are taking advantage of some of the lowest fixed-rates in more than 50 years to lock in interest savings. Over the first half of 2011, fixed-rate mortgage rates hit a low during June, with 30-year product averaging 4.50 percent and 15-year averaging 3.68 percent over the last four weeks of June, according to our Primary Mortgage Market Survey,” he added.

Tags: Freddie Mac, home equity, piggy-bank, borrowers, refinance, cash-out, cash-in, principal, interest, interest rate reduction

Source:
Freddie Mac

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Helpful Tools
Mortgage
Calculator

Estimate your monthly mortgage payment
Auto Loan
Calculator

Determine how much car you can afford before buying
Learn About
Mortgage Loans

Learn about the different types of home loans
15 Year vs 30 Year
Loan Comparison

Compare 15 year and 30 year mortgage loans
Todays Mortgage
Rates

See today's mortgage rates. Shop, compare and save.

August 4, 2011 (Jeff Alan)

Falling home values have left home equity piggy-banks pretty empty as of late. According to a recent report by Freddie Mac, the total amount of cash that borrowers who refinanced their first-lien mortgages took out of their homes was less than 10 percent of the total amount of cash that they took out just five years ago.

The report found that 23 percent of all refinanced loans in the second quarter of 2011 were “cash-out” borrowers, those that increased their loan by at least five percent, with an estimated net dollars of home equity converted to cash estimated to be $7.5 billion.

That’s less than nine percent of the total amount that borrowers took from their homes compared to when cash-out refinance volume peaked in the second quarter of 2006 at $83.7 billion.

Combining the second quarter of 2011 with the first quarter of this year, which saw a similar level of refinance activity, and adjusting for inflation, the amount of equity cashed-out was at the lowest level since the second half of 1996.

Not only has the amount of home equity borrowers cashed-out decreased, so has the number of borrowers compared to previous years. The average percentage of cash-outs during the 1985-2010 period was 46 percent, today the amount is half of that.

Most homeowners who refinanced their first-lien home mortgage either maintained the same the same loan amount or lowered their principal by putting “cash-in.” Over half, 51 percent, maintained about the same loan amount while 26 percent of refinancing homeowners put cash in, reducing their principal.

For 30 year fixed rate mortgages, the median interest rate reduction was about 1 percentage point, a savings of over $1550 in interest payments in the first year of the loan with a principal of $200,000.

Frank Nothaft, Vice President and chief economist of Freddie Mac stated, “This is primarily a ‘rate-and-term’ market, meaning that the typical homeowner is looking to cut their interest rate or shorten their loan term. More than three-in-four borrowers are keeping their loan balance about the same or reducing their loan balance when they refinance.”

“Savvy homeowners are taking advantage of some of the lowest fixed-rates in more than 50 years to lock in interest savings. Over the first half of 2011, fixed-rate mortgage rates hit a low during June, with 30-year product averaging 4.50 percent and 15-year averaging 3.68 percent over the last four weeks of June, according to our Primary Mortgage Market Survey,” he added.

Tags: Freddie Mac, home equity, piggy-bank, borrowers, refinance, cash-out, cash-in, principal, interest, interest rate reduction

Source:
Freddie Mac

FILL OUT THE FORM
It all starts here. Select the loan product you want to apply for and complete the subsequent questionnaire.
WE VERIFY & TRANSMIT TO LENDERS
Once we receive your completed questionnaire we verify a couple vital pieces of information and direct your information to our network of lenders, all within minutes.
REVIEW YOUR OFFERS
With offers in hand you can now compare rates and costs and get the best possible deal. Comparison shopping made easy. You fill out one form and lenders compete for your business.
CHOOSE YOUR LENDER
Congratulations! With the great learning tools we provide for you at LoanRateNetwork and the offers you have received, you've found the right product and the best rate.
HOW LOANRATENETWORK
LOAN CENTER WORKS
ADVANTAGES OF USING
LOANRATENETWORK
FAST & EASY. DATA ENCRYPTED
Applying to multiple lenders is fast and easy with our one simple questionnaire. Choose the product you’re looking for, take a few moments to answer a few questions and you’re on your way to saving.
NO OBLIGATION. NO HIDDEN FEES
Any of the services on our website are 100% free, there is no obligation to use our services or any hidden fees. We’re not loan brokers so we don’t charge broker fees like other websites.
NO SSN OR CREDIT CHECK
No SSN or credit check is necessary to use our services. We bring lenders to you so they can compete for your business and you save. That information only becomes necessary after you choose a lender.
Helpful Tools

August 4, 2011 (Jeff Alan)

Falling home values have left home equity piggy-banks pretty empty as of late. According to a recent report by Freddie Mac, the total amount of cash that borrowers who refinanced their first-lien mortgages took out of their homes was less than 10 percent of the total amount of cash that they took out just five years ago.

The report found that 23 percent of all refinanced loans in the second quarter of 2011 were “cash-out” borrowers, those that increased their loan by at least five percent, with an estimated net dollars of home equity converted to cash estimated to be $7.5 billion.

That’s less than nine percent of the total amount that borrowers took from their homes compared to when cash-out refinance volume peaked in the second quarter of 2006 at $83.7 billion.

Combining the second quarter of 2011 with the first quarter of this year, which saw a similar level of refinance activity, and adjusting for inflation, the amount of equity cashed-out was at the lowest level since the second half of 1996.

Not only has the amount of home equity borrowers cashed-out decreased, so has the number of borrowers compared to previous years. The average percentage of cash-outs during the 1985-2010 period was 46 percent, today the amount is half of that.

Most homeowners who refinanced their first-lien home mortgage either maintained the same the same loan amount or lowered their principal by putting “cash-in.” Over half, 51 percent, maintained about the same loan amount while 26 percent of refinancing homeowners put cash in, reducing their principal.

For 30 year fixed rate mortgages, the median interest rate reduction was about 1 percentage point, a savings of over $1550 in interest payments in the first year of the loan with a principal of $200,000.

Frank Nothaft, Vice President and chief economist of Freddie Mac stated, “This is primarily a ‘rate-and-term’ market, meaning that the typical homeowner is looking to cut their interest rate or shorten their loan term. More than three-in-four borrowers are keeping their loan balance about the same or reducing their loan balance when they refinance.”

“Savvy homeowners are taking advantage of some of the lowest fixed-rates in more than 50 years to lock in interest savings. Over the first half of 2011, fixed-rate mortgage rates hit a low during June, with 30-year product averaging 4.50 percent and 15-year averaging 3.68 percent over the last four weeks of June, according to our Primary Mortgage Market Survey,” he added.

Tags: Freddie Mac, home equity, piggy-bank, borrowers, refinance, cash-out, cash-in, principal, interest, interest rate reduction

Source:
Freddie Mac

HOW LOANRATENETWORK
LOAN CENTER WORKS
FILL OUT THE FORM
It all starts here. Select the loan product you want to apply for and complete the subsequent questionnaire.
WE VERIFY & TRANSMIT TO LENDERS
Once we receive your completed questionnaire we verify a couple vital pieces of information and direct your information to our network of lenders, all within minutes.
REVIEW YOUR OFFERS
With offers in hand you can now compare rates and costs and get the best possible deal. Comparison shopping made easy. You fill out one form and lenders compete for your business.
CHOOSE YOUR LENDER
Congratulations! With the great learning tools we provide for you at LoanRateNetwork and the offers you have received, you've found the right product and the best rate.
ADVANTAGES OF USING
LOANRATENETWORK
FAST & EASY. DATA ENCRYPTED
Applying to multiple lenders is fast and easy with our one simple questionnaire. Choose the product you’re looking for, take a few moments to answer a few questions and you’re on your way to saving.
NO OBLIGATION. NO HIDDEN FEES
Any of the services on our website are 100% free, there is no obligation to use our services or any hidden fees. We’re not loan brokers so we don’t charge broker fees like other websites.
NO SSN OR CREDIT
CHECK
No SSN or credit check is necessary to use our services. We bring lenders to you so they can compete for your business and you save. That information only becomes necessary after you choose a lender.