Owners again starting to cash in on their home’s equity

by Kathy Hereford, December 3, 2018

WASHINGTON – Dec. 3, 2018 – More than 80 percent of borrowers who refinanced in the third quarter chose the “cash out” option – taking out more than they need to pay off their remaining mortgage balance – withdrawing $14.6 billion in equity out of their homes, reports Freddie Mac.

It’s the highest share of cash-out refis since 2007.

Home values increased sharply over the nine-year U.S. expansion since the recession, but worker pay has risen at a much slower pace. As a result, many owners find that their homes are a tappable source of wealth.

Higher mortgage rates are slowing down home sales, and rate-based refinancings – a homeowner refinances a mortgage in order to get a lower interest rate – are also drying up.

In the absence of lower mortgage rates for most homeowners – and since a high percentage of refis involved the cash-out option – some industry watchers worry the products could be marketed to homeowners who don’t understand them by lenders who are anxious to keep up loan volume in a cooling home-lending market.

Source: Wall Street Journal (11/25/18) Eisen, Ben; Rexrode, Christina

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