Home values are on the upswing, and home owners who are becoming equity-rich are taking advantage of their property's increasing worth. Cash-out refinances surged 68 percent in the second quarter compared to a year ago and have reached the highest volume in five years, according to Black Knight Financial Services.
"People realize that refinancing these funds is extremely inexpensive and that rates will eventually rise, so they're capitalizing on the strength of home-price appreciation," says Ben Graboske, senior vice president at Black Knight Data & Analytics.
Over the past year alone, mortgage borrowers have collectively gained about $1 trillion in home equity. Those doing cash-out refinances are taking an average $65,000 individually — about on par with the boom times of 2006. However, the volume of cash-out refinances is nowhere close, remaining 80 percent below the 2005 peak.
Borrowers today are also using more restraint. The average loan-to-value ratio of today's cash-out refinancers is 68 percent, which means borrowers have leveraged 68 percent of the home's current value. That marks the lowest level in a decade.
Cash-out refinances are gaining the most traction in California, which accounts for 30 percent of all volume, followed by Texas at 7 percent, according to Black Knight. California and Texas have also seen some of the highest home-value appreciation in the country in recent months.