Cash-Outs Dominate Slower Florida Home Loan Refinance Market

Perhaps owners are getting the message. As previously reported, even those interest rates have been rising, this isn’t necessarily an ideal time to look into Florida home loan refinancing. A recent conference call with reports by Frank Nothaft seems to back this up.

The chief economist for Freddie Mac offered insight into when and why people refinance Florida home loans. Nothaft defines periods where refinancing constitutes more than 50 percent of mortgage loans as “refi boom periods.”

Current state of Florida home loan refinance market

While nationwide and Florida home loans are expected to remain stable, the shrinking market for refinancing means overall mortgage is expected to be down 12 percent this year.

Fewer families refinancing - but they’re doing so for different reasons. Freddie Mac’s surveys reveal that back in 2003, just 20 percent of families refinanced to cash out some of the equity in their homes. The rest were moving to lock in low interest rates or shorten the terms of their mortgages.

“That’s very different today,” Nothaft said. “In the first half of this year, close to 90 percent of those who refinanced also engaged in cash out.”

Because fewer loans are being refinanced, however, the total dollar amount of equity extracted from homes each year actually peaked in 2005 at around $275 billion; and is expected to decline through 2008 to $125 billion, Freddie Mac reported.

Interest rates on some $500 billion in first-lien ARMs, or approximately 6 percent of all mortgage debt, will reset in 2006, Nothaft said. While many families with adjustable rates will be feeling the squeeze of rising Florida home loan rates, those who haven’t yet refinanced may not have the option.

On the same conference call, Freddie Mae chief economist David Berson said many homeowners who took out subprime “2/28″ Florida home loans - which carry fixed rates for two years, and are adjustable for the remaining 28 - were able to build up their credit by making payments for 24 months and then refinance on better terms.

“The bad news is for those in that group who have not refinanced, it may mean they cannot” because of other debts or credit problems, Berson said.

If you’re curious about Florida home loan refinancing and would like to learn more about your options, submit the form above today. We can offer advice.