The share of those refinancing who pulled cash out hit a new low in the third quarter, according to mortgage financier Freddie Mac.
Just 18 percent of refinance loans were considered cash-out refinances, defined as mortgages where the loan balance increases by at least five percent.
That’s down from 25 percent a quarter earlier and 36 percent in the third quarter of 2009.
The decline in cash-out refinancing was the result of reduced home prices, tighter underwriting standards for loan-to-value ratios, a lack of home equity, and borrowers’ desire to actually pay down their debt.
“Among the refinanced loans in Freddie Mac’s analysis, the median appreciation of the collateral property was a negative 3 percent over the median prior loan life of 3.8 years,” the company said in a release.
Cash-In Refinances Jump
Meanwhile, “cash-in refinance” volume increased to 33 percent from 23 percent a quarter earlier and 18 percent a year ago.
That’s the highest it has been since hitting a record high 36 percent in the fourth quarter of 2009.
Over the first year of the new refinance loan, borrowers will save over $1,400 in principal and interest payments on a $200,000 loan.
Related: Can I refinance with negative equity?