With interest rates on the rise, homeowners have less incentive to refinance their homes. But for those who do refinance, the primary reason tends to be a desire to “cash out,” MarketWatch staffer Andrea Riquier reports.
“Cashing out” is shorthand for taking out a new mortgage that’s bigger than the remaining balance on the old one and using the money that makes up the difference for discretionary purchases.
In the fourth quarter of 2017, the share of all refinances that were cash-outs rose to the highest level since 2008, according to Freddie Mac data. It’s not clear whether the overall volume of cash-out refinances is rising. Right now they’re making up a bigger share of the pie because traditional lower-monthly-payment refis are plunging.
“As people stay in their homes longer we see people reinvesting in their homes by using equity to update their homes and do repair work,” said Rick Sharga, executive vice president for Carrington Mortgage Holdings and an industry veteran.
That’s especially true for older Americans, he added. “We’ve seen a huge expansion of the types of retirement options people have. One is aging in place and retrofitting your house.”Read More