Mortgage refinancing with cash-out rises 25% in 2nd quarter
Mortgage refinancing in which borrowers received cash rose 25 percent in the second quarter as interest rates fell to the lowest level in more than a year.
So-called "cash-out refis" increased to $212.3 billion from $169.6 billion in the first quarter, Freddie Mac reported.
The cash-out share was 74 percent of all refinancings, a 4 1/2 -year high, according to the No. 2 mortgage financier, based in McLean, Va. The data cover refinancings with a balance at least 5 percent higher than the original loan.
"At this point, most of the people who wanted to refinance solely for a lower rate have done so," said Freddie Mac Chief Economist Frank Nothaft. "Now we're seeing a disproportionate share of folks who want to refinance and do a cash-out at the same time."
The equity extracted from homes this year probably will be 18 percent of the total refinanced amount, Freddie Mac said. That will result in about $161.6 billion of home equity being turned into cash this year, the highest ever. In 2003, homeowners extracted a record $146.9 billion of equity.
About a third of the cash extracted from home equity is used for home renovations, about a third for debt repayment and the rest on items such as cars and vacations, Nothaft said.
@SUBHEDSales rebound for homes that are previously owned
Contracts to buy previously owned homes rebounded in June as buyers took advantage of the lowest long-term mortgage rates in 15 months.
The National Association of Realtors index of signed purchase agreements, or pending home resales, rose 0.6 percent to 126.3, the third highest level ever. The May index, which fell 1.5 percent, was revised to 125.6 from 124.9.
The Realtors group started the pending resales index in March to provide a leading indicator for the housing market.