According to Freddie Mac, fewer homeowners are borrowing against their home equity when mortgage refinancing these days. This means either people learned their lesson about treating their homes as a savings account or most homeowners simply don’t have much equity left in their homes. I think the latter is much more likely. Here’s an article from MortgageLoan.com about the trend in borrowing against home equity with your mortgage refinance application:
Only 23 percent of all borrowers who refinanced a first-lien mortgage in the second quarter of 2011 were “cash-out” borrowers, increasing their loan balance by at least 5 percent. By contrast, 46 percent of all primary mortgages refinanced from 1985-2010 involved borrowing additional money against their home equity.
If you’ve decided to go forward with your mortgage refi, especially if you’re planning on taking cash back at closing, it’s very important to compare fees from all the lenders and brokers you’re considering. Most homeowners get so hung up on getting the lowest refinance rate they don’t pay attention to the loan origination fee and lender closing costs and end up overpaying thousands of dollars.
The reason fees are so important when it comes to mortgage refinancing is that it’s not just cash coming out of your pocket, but you’ll have to recoup these expenses before gaining any benefit from your new payment amount. This assumes of course that your payment amount is going down; if you’re borrowing against your home equity it is possible that your payment will go up which means you’ll never recoup your origination fee and closing costs.
You can learn more about your mortgage refinance options without paying unnecessary fees or markup by checking out my free Underground Mortgage Videos.