More Home Owners Turn Equity Into Cash
October 7, 2015
Home values are on the upswing, and home owners who are becoming equity-rich are taking advantage of their property's increasing worth. Cash-out refinances surged 68 percent in the second quarter compared to a year ago and have reached the highest volume in five years, according to Black Knight Financial Services.
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"People realize that refinancing these funds is extremely inexpensive and that rates will eventually rise, so they're capitalizing on the strength of home-price appreciation," says Ben Graboske, senior vice president at Black Knight Data & Analytics.
Over the past year alone, mortgage borrowers have collectively gained about $1 trillion in home equity. Those doing cash-out refinances are taking an average $65,000 individually — about on par with the boom times of 2006. However, the volume of cash-out refinances is nowhere close, remaining 80 percent below the 2005 peak.
Borrowers today are also using more restraint. The average loan-to-value ratio of today's cash-out refinancers is 68 percent, which means borrowers have leveraged 68 percent of the home's current value. That marks the lowest level in a decade.
Cash-out refinances are gaining the most traction in California, which accounts for 30 percent of all volume, followed by Texas at 7 percent, according to Black Knight. California and Texas have also seen some of the highest home-value appreciation in the country in recent months.
Source: “Homes as ATMs: It’s Starting Again,” CNBC (Oct. 5, 2015)
Updated: May 29, 2020