A recent report in Quarterly Refinance Statistics, which covered refinances through 2020, stated that the dollar amount of cash-out refinances was greater in 2020 than in recent years.
In another article published by Freddie Mac a report stated the following:
“Americans treated their homes like ATMs last year, withdrawing $157.7billion amid a cash-out refinancing spree not seen since before the 2008 financial crisis.”
This information should not raise horrible memories of the housing crash we experienced in 2008, though. In this article the facts behind the 2020 refinancing phenomenon are vastly different from those of 2008 as listed below:
- Americans are sitting on much more home equity today. In 2006 the tappable equity (amount of equity available for homeowners to use and still have 20% equity left in their home) topped out at $4.6 trillion. Today that number is $7.3 trillion. This is the largest number of tappable equity ever recorded and includes an 18% increase since the end of 2019.
- Homeowners cashed-out a much smaller amount this time. In 2006, Americans cashed out a total of $321 billion, equaling 7% of the total tappable equity in the country. In 2020 the $153 billion that was cashed out represented only 2% of all tappable equity.
- Fewer homeowners tapped their equity in 2020 than in 2006. Freddie Mac reports that 89% of refinances in 2006 were cash-out. In 2020 that number was only 33%, leaving tappable equity in a better position.
Today’s cash-out refinance situation in no way resembles the situation of 2006 which preceded the housing crash. Recently, the reasons for cash-out refinancing seen by our family company here at Sun Pacific Mortgage, have ranged from investing in rental properties, consolidating debt to improve one’s credit score, getting financing for business capital, and home improvements to name a few.
If you have substantial equity in your home, owner-occupied or investment property, give us a call at 707-523-2099 to discuss the wide range of programs available for short-term private financing. Make your money work for you with a short term private money loan from us.