Bubble Wrap

Homeowners taking out equity in refinancings

Peter G. Miller, author of The Common-Sense Mortgage, says that a record number of mortgages are being refinanced with larger loans.

From Refinancing Before The Storm in RealtyTimes:

In the first quarter of 2006, Freddie Mac says that 88 percent of its loans that were refinanced were replaced with loans that were at least 5 percent larger. This is the highest rate of equity withdrawal in the past 15 years.

Given more equity, many borrowers have decided that the best way to pay for refinancing is with a bigger loan rather than a higher rate. That would readily account for the huge number of loans that are at least 5 percent larger.