Cash-in and rate-and-term refinancing most popular

Freddie Mac’s analysis of mortgage refinance data for the second quarter of 2011 shows that 77 percent of borrowers either brought cash to settlement or kept their loan balance the same.

Mortgage refinance activity in recent months has fluctuated along with mortgage rates, with applications rising whenever rates dip. The Mortgage Bankers Association (MBA) Refinance Index for the week ended July 29 showed an increase 7.8 percent in refinance applications over the previous week. The refinance share of all applications increased slightly to 70.1 percent.

Mortgage refinance rates

According to HSH.com, the average mortgage rate on a 30-year fixed-rate loan last week was 4.80 percent with 0.28 points and a 15-year fixed-rate loan typically was available for 4.00 percent with 0.24 points.  A 5/1adjustable rate mortgage was available for 3.36 percent with 0.24 points.

 While refinance applications were up over the previous week, they are still lower than last year.

“Refinance application volume increased, but even though 30-year mortgage rates are back below 4.5 percent [according to the MBA’s index], the refinance index is still almost 30 percent below last year’s level. Factors such as negative equity and a weak job market continue to constrain borrowers,” said Michael Fratantoni, MBA’s vice president of research and economics.

Cash-in and cash-out refinancing
Freddie Mac’s second quarter survey showed that 26 percent of homeowners reduced their principal balance when refinancing. Cash-out refinances dipped to 23 percent of all mortgage refinance transactions. The amount of cash taken from home equity during the first two quarters of 2011, even when adjusted for inflation, was the lowest level in 15 years.

If you are considering refinancing but have little equity in your property, a cash-in refinance could be beneficial, particularly if your primary goal in refinancing is to lower your monthly payments. A lower balance combined with a lower interest rate could ease your cash flow considerably.