DECEMBER 2004

Cash Out Refinancings

Housing columnist Kenneth R. Harney reports in The Washington Post that a new study from Freddie Mac found that 60 percent of all refinanced mortgages purchased by the company during the third quarter of 2004 involved "cash-outs," up from 42 percent during the second quarter of this year. Freddie Mac estimates that for all of 2004 homeowners will convert $118 billion of their home equity into spendable funds.

The housing underlying the cash-out refinancings in the third quarter had experienced a median appreciation of 17 percent in value during the 2.6 year median life of the prior mortgage. In addition to cashing out some equity, more than half of these refinancers were able to lower their loan interest rates.