{"id":7491,"date":"2021-03-23T10:00:10","date_gmt":"2021-03-23T10:00:10","guid":{"rendered":"https:\/\/thezakariagroup.com\/should-we-fear-the-surge-in-cash-out-refinances\/"},"modified":"2021-03-23T10:00:10","modified_gmt":"2021-03-23T10:00:10","slug":"should-we-fear-the-surge-in-cash-out-refinances","status":"publish","type":"post","link":"https:\/\/thezakariagroup.com\/should-we-fear-the-surge-in-cash-out-refinances\/","title":{"rendered":"Should We Fear the Surge in Cash-Out Refinances?"},"content":{"rendered":"
\n

\"Should<\/p>\n

Freddie Mac<\/em> recently released their Quarterly Refinance Statistics<\/a> report which covers refinances through 2020. The report explains that the dollar amount of cash-out refinances was greater in 2020 than in recent years. A cash-out refinance<\/em>, as defined<\/a> by Investopia<\/em>, is:<\/span><\/p>\n

\n

“a mortgage refinancing option in which an old mortgage is replaced for a new one with a larger amount than owed on the previously existing loan, helping borrowers use their home mortgage to get some cash.”<\/em><\/p>\n<\/blockquote>\n

The Freddie Mac<\/em> report led to articles like the one published by The Real Deal<\/em> titled, House or ATM? Cash-Out Refinances Spiked in 2020,<\/em> which reports<\/a>:<\/p>\n

\n

“Americans treated their homes like ATMs last year, withdrawing $152.7 billion amid a cash-out refinancing spree not seen since before the 2008 financial crisis.”<\/em><\/p>\n<\/blockquote>\n

Whenever you combine the terms “spiked<\/em>,” “homes like ATMs<\/em>,” and “financial crisis<\/em>,” it conjures up memories of the housing crash we experienced in 2008.<\/p>\n

However, that comparison is invalid<\/strong> for three reasons:<\/p>\n

1. Americans are sitting on much more home equity today.<\/strong><\/h4>\n

Mortgage data giant Black Knight<\/em> just issued information on the amount of tappable equity<\/em><\/a> U.S. homeowners with a mortgage have. Tappable equity<\/em> is the amount of equity available for homeowners to use and still have 20% equity in their home. Here’s a graph showing the findings from their report:\"Should<\/a>In 2006, directly before the crash, tappable home equity in the U.S. topped out at $4.6 trillion. Today, that number is $7.3 trillion.<\/strong><\/p>\n

As Black Knight<\/em> explains:<\/p>\n

\n

“At year’s end, some 46 million homeowners held a total $7.3 trillion in tappable equity, the largest amount ever recorded…That’s an increase of more than $1.1 trillion (+18%) since the end of 2019, the largest percentage gain since 2013 and – you guessed it – the largest dollar value gain in history, to boot. All in all, it works out to roughly $158,000 on average per homeowner with tappable equity, up nearly $19,000 from the end of 2019.”<\/em><\/p>\n<\/blockquote>\n

2. Homeowners cashed-out a much smaller amount this time.<\/strong><\/h4>\n

In 2006, Americans cashed-out a total of $321 billion. In 2020, that number was less than half, totaling $153 billion. The $321 billion made up 7% of the total tappable equity in the country in 2006. On the other hand, the $153 billion made up only 2% of the total tappable equity last year.<\/p>\n

3. Fewer homeowners tapped their equity in 2020 than in 2006.<\/strong><\/h4>\n

Freddie Mac<\/em> reports that 89% of refinances in 2006 were cash-out refinances. Last year, that number was less than half at 33%. As a percentage of those who refinanced, many more Americans lowered their equity position fifteen years ago as compared to last year.<\/p>\n

Bottom Line<\/strong><\/h3>\n

It’s true that many Americans liquidated a portion of the equity in their homes last year for various reasons. However, less than half of them tapped their equity compared to 2006, and they cashed-out less than one-third of that available equity. Today’s cash-out refinance situation bears no resemblance to the situation that preceded the housing crash.<\/p>\n<\/div>\n

Powered by WPeMatico<\/a><\/small><\/p>\n","protected":false},"excerpt":{"rendered":"

Freddie Mac recently released their Quarterly Refinance Statistics report which covers refinances through 2020. The report explains that the dollar amount of cash-out refinances was greater in 2020 than in recent years. A cash-out refinance, as defined by Investopia, is: “a mortgage refinancing option in which an old mortgage is replaced for a new one […]<\/p>\n","protected":false},"author":101010,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":"","jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[99,100,102],"tags":[],"jetpack_publicize_connections":[],"yoast_head":"\nShould We Fear the Surge in Cash-Out Refinances? - The Zakaria Group<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/thezakariagroup.com\/should-we-fear-the-surge-in-cash-out-refinances\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Should We Fear the Surge in Cash-Out Refinances? - The Zakaria Group\" \/>\n<meta property=\"og:description\" content=\"Freddie Mac recently released their Quarterly Refinance Statistics report which covers refinances through 2020. 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