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Fewer homeowners tapping into home equity

Equity gleaned from refinancing homes seems to be

Equity gleaned from refinancing homes seems to be going into the houses or to college costs. Credit: iStock

Borrowers cashed out some home equity in almost two out of every 10 refinances during the third quarter, Freddie Mac reported.

That’s down from the average of almost five in every 10 refinances between 1985 and 2010, according to the third-quarter refinance report from the mortgage insurance giant.

The cash-out equity from prime-rate mortgages was at its lowest in 16 years during the third quarter, about $5.3 billion, down from $6.3 billion in the preceding quarter, Freddie Mac said. The peak of the cash-out refinance boom was in the second quarter of 2006, when homeowners took out $83.7 billion, the report said.

At Bethpage Federal Credit Union, where nine out of every 10 loans are refinances, old traditions are coming back to cash outs, said chief executive Kirk Kordeleski.

“People aren’t moving so, they’re spending a little bit more money on their houses,” he said. “People also have the standard needs that they had in the past, whether it’s college or consolidating bills. It doesn’t seem to be taking it out for luxurious items but more fundamental items.”

Kordeleski acknowledged that cash-out refinances have fallen despite the economic strain on families: “The people that are in these very tough financial straits don’t even qualify for the refinancing.”

Still, Bethpage saw record refinance applications in September and October, when 30-year mortgage rates hit all-time recorded lows.

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