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Cash-Out Refinances Rise As Borrowers Capitalize on Increased Equities

money-houseCash-out refinance volume rose nearly 70 percent year-over-year in the second quarter of 2015, as borrowers took advantage of the increased equity available to them and historically low mortgage interest rates.

Black Knight Financial Services, Inc., Data & Analytics division latest Mortgage Monitor Report found cash-out refinances rose 68 percent year-over-year, the highest volume since 2010. However, cash-out refinances still remain 80 percent under peak levels recorded in 2005.

Ben Graboske, Black Knight Data & Analytics SVP noted that borrowers are tapping into available equity, but higher interest rates could change things a bit.

“Even so, it’s clear that borrowers have been capitalizing on the increased equity available to them," Graboske said. "However, as interest rates rise, we could see an increase in HELOC lending and corresponding slowing in first lien cash-out refis, as borrowers will likely want to hang on to lower rates for their first mortgage while still being able to tap available equity.”

bk1On average, borrowers are pulling out an average of $67,000 of equity through cash-out refis, with resulting average LTVs are at 68 percent, the lowest in 10 years.

Less than 10 percent of all cash-out refinances have LTVs above 80 percent, also at the lowest level in over 10 years. Meanwhile, almost 60 percent of cash-out refinance
volume is coming from borrowers with UPBs under $200.

Over 30 percent of these cash-out refinances occurred in California, followed by Texas with 7 percent, the report showed.

According to the monitor, refinances in the second quarter this year received an average savings of $136 per month and interest rate reductions of 1.08 percent, marking the lowest monthly payment savings since 2006 and the lowest rate reductions since 2010.

"These low averages are primarily due to the fact that borrowers refinancing are either lower unpaid balance (UPB) borrowers that haven’t yet taken advantage of low rates (and who will see lower monthly savings), or higher UPB borrowers that are taking advantage of low rates for a second or third time, and so are seeing incremental savings as compared to earlier reductions, the report said."

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Click here to view the complete Mortgage Monitor.

Photos Courtesy of Black Knight.

About Author: Xhevrije West

Xhevrije West is a writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.
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