'Cash-Out' Mortgage Refinancing Drops to 1995 Level in 2nd Quarter

The net amount of home equity converted to cash as part of a refinance, or “cash-out,” is at the lowest level in 17 years, according to Freddie Mac.
Most refinancing borrowers just want to lower their payments at the current record-low interest rates, reducing or maintaining their mortgage principal debt.
During the second quarter of this year, the typical borrower who refinanced reduced their interest rate by about 1.5 percentage points. On a $200,000 loan, that represents a saving of $2,900 in interest during the next 12 months.
Fixed-rate mortgage rates hit new lows in June, with 30-year loan averaging 3.68 percent and the 15-year averaging 2.95 percent.
In the second quarter of 2012, 81 percent of homeowners who refinanced their first-lien home mortgage either maintained about the same loan amount or lowered their principal balance by paying-in
additional money at the closing table, reported Freddie Mac.
Of these borrowers, 59 percent maintained about the same loan amount, and 23 percent of those refinancing reduced their principal balance.
The share of borrowers that kept about the same loan amount was the highest in the 27-year history of tracking such activity, Freddie Mac said.
The net dollars of home equity converted to cash as part of a refinance, adjusted for inflation, was at the lowest level in 17 years – since the second quarter of 1995.
In the second quarter of 2012, an estimated $5 billion in net home equity was cashed out during the refinance of conventional prime-credit home mortgages.
That is substantially less than during the peak cash-out refinance volume of $84 billion during the second quarter of 2006.

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