Home values are rising and homeowners are taking advantage of
that, finally tapping into that equity again in the form of cash-out mortgage
refinances. They are doing so, however, by pulling the most conservative
amounts in history.
Prior to the historic housing crash of the last decade,
homeowners used their homes like ATMs, pulling out as much cash as the bank
would allow, which at the time was essentially all of it and more. This led to
millions of borrowers falling underwater on their home loans as home prices
fell, and leading to 7.1 million homes so far ending up in foreclosure,
according to Black Knight Financial Services.
Lending standards have tightened significantly since then, but
borrowers are clearly much more risk averse. They are taking cash out again; 42
percent of mortgage refinances last fall involved borrowers taking cash out of
their homes, not just lowering their interest rates. That is the highest share
since 2008, according to Black Knight.
The average cash-out amount was over $60,000, but the average loan-to-value ratio after the refinance was 67 percent, the lowest level on record. Borrowers left 33 percent equity still in the home which is still a very healthy level.
With rents rising, many are taking out cash to purchase rental properties or make some upgrades to their current homes as there is simply not enough quality inventory available. So, many are not selling..they are staying put and improving instead.
