| Homeowners continue to borrow against the equity in their homes at an amazing pace. The reasons are simple. Rates are low. Payments can be reduced. Extra cash is available. What is not to like?
According to a report released this week by Freddie Mac, in the fourth quarter of 2006, 84 percent of new mortgages that were the result of refinancing were "cash out" loans. A cash out has been defined as a loan where the new mortgage is at least 5% more than the value of the mortgage it replaces. This makes a refinancing with this strategy a great source of money-A CASH MACHINE
This represents an amazing $70.7 billion in cash out refinance loans for the quarter down from the third quarter at $80.2 billion. Refinancing grew to 46 % of all mortgage applications for the period.
The $70.7 billion in cash outs money helps fuel the economy. Major home improvements, college tuition, debt consolidation all are reasons homeowners take out home equity loans.
A REFINANCE HOME EQUITY LOAN cash out makes great sense if the homeowner can get a loan that will lower their monthly payments, especially if the current arm is scheduled to readjust soon. Throw in some extra cash and you have yourself a great deal.
It is no wonder lenders love these loans so much. Mortgagors are willing to pay higher rates now four quarters in a row for the same collateral-your home. Is that a classic win-win?
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