Homes Not Being Used as Piggy Banks Nearly as Often
Homes Not Being Used as Piggy Banks Nearly as Often
Homes Not Being Used as Piggy Banks Nearly as Often
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May 13, 2011 (Chris Moore)

The housing bust, and subsequent housing price crash, has crimped Americans penchant of using their homes as piggy banks. Over the past 25 years, 62 percent of refinanced loans were “cash-out” loans where the borrower increased their loan balance by five percent or more, but now according to the latest report from Freddie Mac, only 25 percent of all refinanced loans in the first quarter of 2011 were cash-out loans.

According to the results of Freddie Macs first quarter refinance analysis, 3 out of 4 homeowners who refinanced their first lien mortgage either maintained about the same amount on their principal loan or paid additional funds to lower the amount of their mortgage principal.

Twenty-one percent of the homeowners reduced their principal balance by paying additional funds and 54 percent maintained the same loan amount, the highest share since Freddie Mac began keeping records in 1985.

As a comparison, in 2006, the peak of the housing and refinancing boom, borrowers took out $83.7 billion from their homes in the second quarter of that year. In the first quarter of 2011 an estimated $6.0 billion in net home equity was cashed out. No wonder Hummer went out of business!

Frank Nothaft, vice president and chief economist of Freddie Mac, stated, “Consumers continue to reduce their debt, either by paying down or paying off their mortgage loan or reducing the interest cost. Homeowners’ aggregate financial-obligation ratio, which peaked during the third quarter of 2007, had dropped by the end of 2010 to a level last seen more than a decade ago.”

The median interest rate reduction for a 30-year fixed-rate mortgage was about 1.2 percentage points, or a savings of about 20 percent in interest costs. Over the first year of the refinance loan life, these borrowers will save over $1,800 in interest payments on a $200,000 loan.

The report found that the median appreciation of the collateral properties that refinanced was a negative six percent over the median prior loan life of five years, meaning the median life of the loans that were refinanced was five years and the median depreciation of those homes was six percent. By comparison, Freddie Mac’s House Price Index shows a 21 percent decline in home values in its portfolio from 2005 through the end of 2010.

It all adds up to a lot less coin in the piggy bank.

Tags: Freddie Mac, piggy banks, cash-out loans, refinanced loans, cash-in loans, mortgage principal, refinance analysis report, interest rate reduction

Source:
Freddie Mac

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May 13, 2011 (Chris Moore)

The housing bust, and subsequent housing price crash, has crimped Americans penchant of using their homes as piggy banks. Over the past 25 years, 62 percent of refinanced loans were “cash-out” loans where the borrower increased their loan balance by five percent or more, but now according to the latest report from Freddie Mac, only 25 percent of all refinanced loans in the first quarter of 2011 were cash-out loans.

According to the results of Freddie Macs first quarter refinance analysis, 3 out of 4 homeowners who refinanced their first lien mortgage either maintained about the same amount on their principal loan or paid additional funds to lower the amount of their mortgage principal.

Twenty-one percent of the homeowners reduced their principal balance by paying additional funds and 54 percent maintained the same loan amount, the highest share since Freddie Mac began keeping records in 1985.

As a comparison, in 2006, the peak of the housing and refinancing boom, borrowers took out $83.7 billion from their homes in the second quarter of that year. In the first quarter of 2011 an estimated $6.0 billion in net home equity was cashed out. No wonder Hummer went out of business!

Frank Nothaft, vice president and chief economist of Freddie Mac, stated, “Consumers continue to reduce their debt, either by paying down or paying off their mortgage loan or reducing the interest cost. Homeowners’ aggregate financial-obligation ratio, which peaked during the third quarter of 2007, had dropped by the end of 2010 to a level last seen more than a decade ago.”

The median interest rate reduction for a 30-year fixed-rate mortgage was about 1.2 percentage points, or a savings of about 20 percent in interest costs. Over the first year of the refinance loan life, these borrowers will save over $1,800 in interest payments on a $200,000 loan.

The report found that the median appreciation of the collateral properties that refinanced was a negative six percent over the median prior loan life of five years, meaning the median life of the loans that were refinanced was five years and the median depreciation of those homes was six percent. By comparison, Freddie Mac’s House Price Index shows a 21 percent decline in home values in its portfolio from 2005 through the end of 2010.

It all adds up to a lot less coin in the piggy bank.

Tags: Freddie Mac, piggy banks, cash-out loans, refinanced loans, cash-in loans, mortgage principal, refinance analysis report, 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.
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May 13, 2011 (Chris Moore)

The housing bust, and subsequent housing price crash, has crimped Americans penchant of using their homes as piggy banks. Over the past 25 years, 62 percent of refinanced loans were “cash-out” loans where the borrower increased their loan balance by five percent or more, but now according to the latest report from Freddie Mac, only 25 percent of all refinanced loans in the first quarter of 2011 were cash-out loans.

According to the results of Freddie Macs first quarter refinance analysis, 3 out of 4 homeowners who refinanced their first lien mortgage either maintained about the same amount on their principal loan or paid additional funds to lower the amount of their mortgage principal.

Twenty-one percent of the homeowners reduced their principal balance by paying additional funds and 54 percent maintained the same loan amount, the highest share since Freddie Mac began keeping records in 1985.

As a comparison, in 2006, the peak of the housing and refinancing boom, borrowers took out $83.7 billion from their homes in the second quarter of that year. In the first quarter of 2011 an estimated $6.0 billion in net home equity was cashed out. No wonder Hummer went out of business!

Frank Nothaft, vice president and chief economist of Freddie Mac, stated, “Consumers continue to reduce their debt, either by paying down or paying off their mortgage loan or reducing the interest cost. Homeowners’ aggregate financial-obligation ratio, which peaked during the third quarter of 2007, had dropped by the end of 2010 to a level last seen more than a decade ago.”

The median interest rate reduction for a 30-year fixed-rate mortgage was about 1.2 percentage points, or a savings of about 20 percent in interest costs. Over the first year of the refinance loan life, these borrowers will save over $1,800 in interest payments on a $200,000 loan.

The report found that the median appreciation of the collateral properties that refinanced was a negative six percent over the median prior loan life of five years, meaning the median life of the loans that were refinanced was five years and the median depreciation of those homes was six percent. By comparison, Freddie Mac’s House Price Index shows a 21 percent decline in home values in its portfolio from 2005 through the end of 2010.

It all adds up to a lot less coin in the piggy bank.

Tags: Freddie Mac, piggy banks, cash-out loans, refinanced loans, cash-in loans, mortgage principal, refinance analysis report, 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.