US borrowers are pouring in more cash at mortgage closings, according to the US Federal Home Loan Mortgage Corp.
Around 22 percent of borrowers who refinanced first-lien home loans paid off mortgage closings with cold cash, the third-highest percentage since Freddie Mac began recording borrowers who “cash-in” at mortgage closings.
In Q1 this year, about 19 percent of borrowers who refinanced their mortgage had lowered their principal mortgage on the day of the closing, while 27 percent of refinance mortgages in Q2 included borrowers who increased their balance by about five percent, said Freddie Mac.
From October last year to June this year, a new record was set for the lowest three-quarters of "cash-out" activity, which was lowered due to tighter lending policies and declining home prices.
“If you pay down your mortgage balance you save the interest you would pay on the loan, about 4.6 percent at today’s rates, over the life of the loan versus earning a percentage point or less in certificates of deposit and money markets," said Frank Nothaft, chief economist and vice-president of Freddie Mac.