Cash-out mortgage refinancing demand booms 33% in past year, Black Knight reports

Homeowners have nearly $178,000 on average in tappable home equity

New data shows that homeowners are rushing to get cash-out mortgage refinances, allowing them to tap into record-high home values in the form of cash. (iStock)

Homeowners are utilizing record-high home values to take advantage of cash-out refinancing, according to mortgage analytics firm Black Knight

Cash-out mortgage refinancing demand has risen 33% over the past year, driven by a 32% rise in tappable equity, the report showed. That's despite the fact that mortgage rates have been rising slightly over the past few months.

"This shift tends to happen in any rising rate environment, never mind one in which American mortgage holders have more than $9 trillion in tappable equity available to them," Black Knight Secondary Marketing Technologies President Scott Happ said.

Happ added that although cash-out refinances dipped slightly (-0.3%) for the month of October, "the overall trend toward an equity-centric refi market remains strong."

Keep reading to learn more about how you can take advantage of historically high home values through a cash-out refinance. You can compare cash-out refi offers on Credible for free without impacting your credit score and find the lowest possible rate for your financial situation.

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High home equity triggering the cash-out refinance 'boom'

Cash-out refinancing allows homeowners to take out a larger mortgage as a way to borrow cash from their tappable home equity. The new mortgage will replace the existing mortgage, so the monthly payment may change.

Tappable equity is the amount homeowners can access while retaining at least 20% equity in their homes. Overall tappable equity has increased $2.3 trillion since Q3 2020, according to Black Knight. The average homeowner has nearly $178,000 in tappable equity, an increase of $53,000 in the past 18 months due to skyrocketing home values

Homeowners have responded to growing home equity by locking in cash-out refinance offers at a breakneck pace. Aside from the 33% increase over the past year, demand for cash-out refinancing has grown 41% between June and August alone, the data showed. 

To tap into your home's equity, begin the process by viewing cash-out refinance rates on Credible. Then, estimate your new monthly mortgage payments using a home loan calculator.

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When to cash-out refinance

Cash-out refinancing helps you access a lump sum of cash from your home that you can use as you see fit. If you need money to pay for home improvements, pay off credit card debt or finance a large expense, then refinancing may help you reach these financial goals.

When considering whether you should refinance your mortgage loan, ask yourself the following questions:

  • What is the value of your home? You can estimate your home's value on websites like Realtor.com, but you'll need an appraisal to determine an exact figure. Although home values are at record highs, be careful not to overborrow unnecessarily.
  • How much tappable equity do you have? Most cash-out mortgage lenders will allow you to borrow up to 80% of your home's value to avoid private mortgage insurance (PMI). To determine your amount of equity, subtract your mortgage balance from your home's value.
  • What is your current mortgage rate? Ideally, you should only refinance your mortgage if you can qualify for a lower rate. Although mortgage rates have risen in the past several months, they're still hovering near historic lows.

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If you have tappable equity and can qualify for a lower mortgage interest rate, then cash-out mortgage refinancing may be right for you. Visit Credible to compare refinance loan rates across multiple mortgage lenders by filling out a single form.

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With mortgage rates predicted to rise, now is the time to refinance

Mortgage rates have been steadily rising since they reached record lows in January 2021, according to Freddie Mac, and experts believe that this trend will continue. The Mortgage Bankers Association (MBA) predicts that average 30-year mortgage rates will reach 4.0% in 2022 and 4.3% in 2023, which is up from 3.1% in 2021. 

Rising mortgage rates are due, in part, to predictions from the Federal Reserve, which kept interest rates low over the past two years to spur economic recovery during the coronavirus pandemic. However, the Fed is planning to implement its first post-pandemic rate hike in 2022 — at that time, mortgage rates will rise at a much faster pace.

If you're considering a cash-out mortgage refinance, it's important to act before the Fed raises interest rates. You can browse current mortgage rates from real lenders in the table below, and visit Credible to begin the refinancing process and see if you can qualify for a lower interest rate. 

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