Cash-out refinancing hits peak

Homeowners are tapping their equity at highest rate in 16 years.


NEW YORK (Reuters) -- U.S. homeowners took cash out of their homes in the third quarter at the highest rate in 16 years, spurred by high costs on other types of loans, according to home finance company Freddie Mac (Charts) .

In the quarter, 89 percent of Freddie Mac-owned loans that refinanced got mortgages that were at least 5 percent higher than the original balances.

"High demand for cash extraction through refinance is being driven by the high cost of home improvement loans and home-equity lines of credit -- that is, the cost of alternative financing -- and still-strong demand for home improvements," Amy Crews Cutts, Freddie Mac deputy chief economist, said in a release.

Also, a huge wave of adjustable-rate mortgages created in the past few years are facing their first reset, giving borrowers the incentive to refinance and take additional cash, Freddie Mac said.

The third quarter share of cash-out refinancing is up from 88 percent in the second quarter.



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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.