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'Cash Out' Is Driving This Refinancing Boom.(Brief Article)
With rates edging upward, refinancing activity has slackened, but debt consolidation may give this refinancing boom some extra momentum.
Significant gains in home price appreciation have given many homeowners an opportunity to consolidate debt or tap into their equity for other purposes, and half of homeowners who refinance appear to be taking cash out of the deal.
That "cash out" phenomena is a distinguishing characteristic of this refinancing boom, and it appears to be acting as an extra incentive for people to replace their home loan.
David Berson, Fannie Mae's chief economist, says some economists underestimated the extent of this year's refi boom when they analyzed outstanding mortgage volume by coupon rate. That's because they didn't take debt consolidation into account as a refinancing incentive.
Fannie Mae projects that loan origination volume will reach $1.52 trillion this year, slightly eclipsing the record set in 1998. Refinancing on the year, he believes, will account for 45% of all home loan transactions.
"As long as mortgage rates don't skyrocket, I think the cash out refinancing will continue to be strong," he told MSN.
However, fewer homeowners have refinanced from 30-year loans into 15-year loans this year than did so in the 1998 refi boom.
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- Newspaper article from: Knight Ridder/Tribune Business News April 24, 2003 700+ words
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