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August 5th, 2011

Want to refinance? Bring cash

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Refi ApplicationNot long ago, homeowners were able to refinance their homes while simultaneously getting cash back (via some home equity). As home prices plummeted and equity evaporated, cash-out refinances went out of style real quick.

Trouble refinancing? Bring cash to the table

Today, with all the hassles and restrictions surrounding home financing, with refinancing programs–like HARP–doing little, your best shot at a successful refinance is to bring cash to the closing table.

From National Servicing News:

The GSE said 77% of consumers who refinanced in the second quarter either kept their loan balance the same, or reduced it. In 1Q the ratio was 75%.

Roughly 26% of mortgagors engaged in a ‘cash-in’ refi by bringing more money to the closing table in an effort to reduce principal. In 1Q, 21% of consumers engaged in cash-in transactions.

“This is primarily a ‘rate-and-term’ market, meaning that the typical homeowner is looking to cut their interest rate or shorten their loan term,” said Freddie chief economist Frank Nothaft.

Cash-out refis accounted for just 23% of the market, compared to 46% from 1985 to 2010.

It’s relatively easy to understand why the number of cash-out refis has gone down:

A lot of homeowners seeking to lower their monthly payments these days are struggling to just stay afloat. Many or most don’t have the extra cash to lower their balances.

You can still refinance even without bringing cash to the table; and these articles can help:

Should you refinance?

Why can’t I refinance?

Why is it so hard to be approved for a HARP refinance?

Understanding HARP’s stumbling blocks will increase your success

To learn more, visit our refinance page at http://www.hsh.com/refinance.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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