Cash-In And Cash-Out Mortgage Refinances Each Set Records

Homeowners who are confident in how to refinance were able to maintain or reduce their mortgage rates at a rate of 85 percent during the fourth quarter of 2011, according to new data released this week by Freddie Mac.

Lenders will offer homeowners multiple mortgage refinance options that are contingent upon whether they want to reduce the amount of money they owe or whether they want to tap the equity of the home for other purposes.

Homeowners generally increase the length and balance of a fixed-rate loan or adjustable-rate loan in order to receive cash back, which many use to conduct home repairs or remodeling, or to make another significant purchase. These "cash-out" loans reached a record-low percentage of refinances in the fourth quarter - 15 percent. Comparatively, these loan restructurings comprised about 46 percent of total refinances from 1985 to 2010.

Conversely, "cash-in" refinancing achieved a record high in the fourth quarter - 85 percent of all refinances. These plans provide homeowners with the ability to reduce their principal balance by taking advance of low interest rates. These have been particularly popular recently as mortgage lenders are currently offering record-low interest rates at around 3.87 percent, according to Freddie Mac.

More homeowners should be able to lower their principal balances because more individuals are getting back to work and receiving paychecks. Defying most expectations, the U.S. unemployment rate fell by 0.2 percent to 8.3 percent following the addition of 243,000 new jobs last month. Most experts thought that December's optimistic job report could be explained by retailers adding temporary jobs during the holiday season, but January's figures suggest improvement could be more long-term.

Borrowers wondering when to refinance should contact a mortgage lender to discuss their options and to determine if they could benefit from a restructured loan agreement.

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