More homeowners taking the cash-out refinancing route

Real Estate Watch

September 09, 2001

Cash-out refinancings, where homeowners take out 5 percent or more of their home's equity, rose to 57 percent in the second quarter, according to Freddie Mac, the federally chartered company that supplies funds to lenders by purchasing mortgages.

That figure is up from the first quarter's 52 percent, but down from last year's second quarter, where 81 percent of refinanced loans were for amounts greater than 5 percent of a home's equity.

With a cash-out refinanced loan, the new loan exceeds the total amount of money needed to repay the existing first mortgage and any additional lien. The borrower then receives the cash balance of the loan to use for other expenses.

As part of its quarterly refinance study, Freddie Mac also found that the median age of refinanced loans dropped to 2.6 years in the second quarter, compared with 6.4 years in last year's second quarter.

Fueling that quick-turnaround in refinancing were rising home values: Refinanced properties appreciated an average 15 percent over that average 2.6 years of the original loan, according to Freddie Mac.

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