Refinance ‘Cash-Out’ Volume at 17-Year Low: Freddie Mac

The net dollars of home equity converted to cash as part of a refinance is at the lowest level in nearly 17 years, according to Freddie Mac’s first quarter 2012 report on “cash-out” data.
“Cash-out” borrowers, those who increased their loan balance by at least five percent, represented 21 percent of all refinance loans, a percentage not seen since the third quarter of 1995.
The weighted average cash-out share from 1985 to 2008 was 50 percent, Freddie Mac said.
In the first quarter of 2012, an estimated $5.3 billion in net home equity was cashed out during the refinance of conventional prime-credit home mortgages, down from $7.0 billion in the fourth quarter and substantially less than during the peak cash-out refinance volume of $83.7 billion during the second quarter of 2006.
Nearly 80 percent of homeowners who refinanced their first-lien mortgage either maintained about the same loan amount or lowered their principal balance by paying a certain amount toward reducing the debt, reported Freddie Mac.
In other findings, Freddie Mac reported that the median interest rate reduction for a 30-year fixed-rate mortgage was about 1.5 percentage points, or a savings of about 27 percent in interest rate, the largest percent reduction recorded in the 27 years of analysis.
Over the first year of the refinance loan life, the median borrower will save about $2,900 in interest payments on a $200,000 loan.

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