Home Check: Homes as ATMs Happening Again
Homes are a prime investment. It is not only an investment for the future but it offers comfort and security as well. However as the economy remains unstable, people are resorting to different methods to deal with home mortgage and dealing with financial crisis as well.
As the housing prices continue to rise, homeowners are gaining an upper hand. They do it through the cash out refinance method. According to data of Black Knight Financial Services as cited by Yahoo Finance, "Cash-out refinances jumped 68 percent in the second quarter from a year ago, and this is the highest volume of this type of refinance in five years."
The Senior Vice President at Black Knight Data & Analytics, Ben Graboske said, "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."
Looking at the transaction history, the mortgage holders achieved about $1 trillion in home equity collections for this year alone. On an individual basis, borrowers doing cash-out refinances are taking an average $65,000, which is comparable to what borrowers did in 2006, the height of the last housing boom as further reported by CNBC.
Today's refinancer is in a far more solid equity position in his or her home, compared with borrowers then, who used their homes like ATMs, pulling out every available dollar as further pointed out by CNBC.
The figures have shown that there is a strong price appreciation and consumer preference. Among the reasons why homes are being used as ATM's are the jump in cash-out refinances in auto sales and home remodeling. The lack of homes for sale has caused many potential buyers to stay where they are, even though they have the equity to move up and in turn, they are using that equity to not only enhance their home but to add to its value as further noted by CNBC.
Cash out refinances are among the sought after methods of many homeowners in this present time. It is most popular in California, amounting to 30 percent of all volume according to a study done by Black Knight.
People prefer to remodel their home rather than abandon it or buy another home, leading to using homes as equity, cash out refinancing, and as ATM's.