More borrow from home equity when refinancing


March 26, 2000

Fifty-nine percent of homeowners who refinanced their mortgage in 1999 borrowed some of the equity in their homes, trading the old mortgage for a new one that was at least 5 percent greater than the original loan.

According to Freddie Mac's annual refinance review, the 1999 number was higher than the 48 percent of homeowners who refinanced in 1998 for an amount at least 5 percent higher.

In the fourth quarter of 1999, 77 percent of those homeowners refinancing borrowed on housing equity as opposed to 45 percent in the fourth quarter of 1998.

"With interest rates rising in 1999, there were fewer and fewer homeowners refinancing their homes in order to reduce their payments," said Vassilis Lekkas, principal economist for Freddie Mac. "Instead, more of the refinancing that occurred was to take out built-up equity, something that the continuing robust housing market has enabled many consumers to do."

In 1998, Freddie Mac's Primary Mortgage Market Survey tracked mortgage rates that dropped to generational lows, resulting in an increase in refinancing to lower-rate mortgages.

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