Smart Borrower Blog

Cash-Out Refinances Grew 28% Since 2018


Jan 1st, 2020 @ 7:16 PM by Amber Nelson


With home prices continuing to climb in the face of limited inventory, American homeowners have trillions of dollars in equity and they are taking advantage of it.

According to real estate data firm Black Knight, cash-out refinance loans made up 52% of all refinance activity in the 2019 third quarter, up from just 24% a year ago. Those cash-out loans accounted for $36 billion of home equity, the highest level since before the housing market crash and the Great Recession.

Black Knight experts expect cash-out refinances to increase in popularity in the coming year, as homeowners’ equity has grown 5% over the last 12 months, now totaling trillions of dollars. Total home equity is only 1% below the record high.

“Given that tappable equity continues to grow—$6.2 trillion as of Q3 2019—and the continued headwinds facing the HELOC market, this is a segment lenders and servicers may likely focus on in coming months,” said Bed Graboske, Black Knight data and analytics president. “Any upward movement in rates would likely only drive the cash-out share of lending higher.”

And currently 65% of the nation’s 45 million homeowners can take out home equity cash-out refinances and still keep their same interest rate or even lower it.

Total refinance lending, including loans to reduce rates or change loan terms has nearly doubled since hitting an 18-year low in the 2018 fourth quarter. In fact, refinance loans for better rates or terms jumped 500% in the previous year.

Because interest rates have dropped so dramatically in 2019, even borrowers who took out mortgages as early as the beginning of the year have been able to refinance into lower rates. Black Knight reported that one-third of all refinance activity in the third quarter was made up of loans originally made in 2018 and 17% of the activity came from 2019 mortgage loans. These borrowers were able to reduce their rates by an average of 0.7% to 0.9%.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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