So much for using your home as an ATM machine…
A whopping 46 percent of refinance volume in the fourth quarter was cash-in, according to a report released today by mortgage financier Freddie Mac.
Cash-in refinances refer to those in which the principal mortgage balance is lowered as a result of homeowners paying-in additional money at the closing table, usually by necessity.
Meanwhile, cash-out refinance volume, where loan balances increase by at least five percent, represented just 16 percent of all refinance loans, the lowest since analysis began in 1985.
As a result, home equity converted to cash fell to a meager $6.8 billion, the lowest level in more than a decade.
The median appreciation of properties tied to the refinances was a negative three percent over the median prior loan life of 4.1 years.
The good news is that the median mortgage rate reduction was about 1.25 percentage points, or a savings of 22 percent in interest costs.
On a $200,000 loan, such borrowers will save over $1,850 in principal and interest mortgage payments during the first year.
“Consumers are generally shedding debt, and mortgages are just another way they’re doing it,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a release.
“Between 2007 and the third quarter of 2010, mortgage debt declined more than $400 billion, according to the Fed. The estimated volume of net equity cashed out in our report do not account for the homeowners who have paid off their mortgages in their entirety.”
Sign o’ the times.