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LendingTree Study: Share of Cash-Out Refinance Applications Fell Nearly 14% in 6 Months

Through the first half of 2020, the coronavirus pandemic has led to record-low mortgage rates, prompting a boom in home loan refinancing since the start of the year.

While refinancing is unquestionably more popular now than it has been in recent years, some lenders have tightened their borrowing requirements and limited the types of products they offer.

In terms of sheer volume, cash-out refinancing (when a homeowner replaces their existing mortgage with a new one with a higher loan amount, and pockets the difference in cash) has surged since the start of the year. However, its popularity compared with other types of refinances, like more traditional rate-and-term refinancing, has fallen significantly in many areas of the country since January. So while the total number of people applying for cash-out refinances has risen, the share of cash-out refi applications as a share of total refinance applications has fallen.

Key findings

  • The share of refinances for 30-year fixed cash-out loans has fallen since January in all but 3 of the nation’s 50 metros analyzed in LendingTree’s study, resulting in an average percent decline of 13.5% from January to June. That’s not to say that homeowners are totally avoiding cash-out refinances. Instead, because it is harder to be approved for a cash-out refi, they are more likely to look into other refinance types.
  • While the share of cash-out refinances is down from January to June, the share has grown an average of 7.9% from May to June. As the economy gradually reopens and people return to work, lenders are showing more willingness to approve riskier loans. This is likely a big part of why cash-out refinances grew relative to other types of refinances in recent months.
  • Although the share of cash-out refinance applications is down from January, the total number of all types of mortgage refinances, including cash-out loans, are up significantly in number from the start of the year. In January, there were more than 23,000 cash-out refinance requests on the LendingTree platform in the 50 metros looked at in LendingTree’s study. In July, that number had increased by 109% to 48,000.
  • From January to June, Cleveland, Milwaukee and Jacksonville, Fla., were the only three metros to see growth in the share of cash-out refinances. These three metros saw an increase of 1.6% in the share of refinance applications for cash-out refinances over that time period.  All other metros saw a decrease in the share of cash-out refi applications, with three metros in California — San Jose, San Francisco and San Diego — seeing the biggest declines. The average decline in those three metros was 29.6%.
  • From May to June, Pittsburgh, Philadelphia and Indianapolis saw the largest percent increase in the share of cash-out refinance applications. The average month-over-month percent increase in those metros was 21.9%. Austin, Texas, was the sole metro to see a percent decrease over that same time period, with a month over month decline of 4.2%.

Metros with largest % increase/smallest % decrease in cash-out refinance applications (January to June)

No. 1: Cleveland

  • % change in the share of cash-out refinance applications from January to June 2020: 4.3%
  • % of mortgage refinance applications for cash-out refinances in June 2020: 36.9%
  • % change in the number of cash-out refinance applications from January to June 2020: 9.3%

No. 2: Milwaukee

  • % change in the share of cash-out refinances applications from January to June 2020: 0.3%
  • % of mortgage refinance applications for cash-out refinances in June: 33.6%
  • % change in the number of cash-out refinance applications from January to June 2020: -0.8%

No. 3: Jacksonville, Fla.

  • % change in the share of cash-out refinance applications from January to June 2020: 0.1%
  • % of mortgage refinance applications for cash-out refinances in June: 35.7%
  • % change in the number of cash-out refinance applications from January to June 2020: 11.9%

Metros with largest % decrease in cash-out refinance applications (January to June)

No. 1: San Jose, Calif. 

  • % change in the share of cash-out refinance applications from January to June 2020: -34.5%
  • % of mortgage refinance applications for cash-out refinances in June: 20.8%
  • % change in the number of cash-out refinance applications from January to June 2020: 23.0%

No. 2: San Francisco

  • % change in the share of cash-out refinance applications from January to June 2020: -27.9%
  • % of mortgage refinances applications for cash-out refinances in June: 23.8%
  • % change in the number of cash-out refinance applications from January to June 2020: 25.1%

No. 3: San Diego

  • % change in the share of cash-out refinance applications from January to June 2020: -26.5%
  • % of mortgage refinance applications for cash-out refinances in June: 28.4%
  • % change in the number of cash-out refinance applications from January to June 2020: 5.4%


Metros with largest % increase in cash-out refinance applications (May to June)

No. 1: Pittsburgh

  • % change in the share of cash-out refinance applications from May to June 2020: 23.6%
  • % of mortgage refinance applications for cash-out refinances in June: 33.1%
  • % change in the number of cash-out refinance applications from May to June 2020: 7.8%

No. 2: Philadelphia

  • % change in the share cash-out refinance applications from May to June 2020: 21.9%
  • % of mortgage refinance applications for cash-out refinances in June: 30.7%
  • % change in the number of cash-out refinance applications from May to June 2020: 10.1%

No. 3: Indianapolis 

  • % change in the share of cash-out refinance applications from May to June 2020: 20.3%
  • % of mortgage refinance applications for cash-out refinances in June: 34.6%
  • % change in the number of cash-out refinance applications from May to June 2020: 4.7%

Metros with smallest % increase/largest % decrease in cash-out refinance applications (May to June)

No. 1: Austin, Texas

  • % change in the share of cash-out refinance applications from May to June 2020: -4.2%
  • % of mortgage refinance applications for cash-out refinances in June: 29.2%
  • % change in the number of cash-out refinance applications from May to June 2020: 9.3%

No. 2: Columbus, Ohio

  • % change in the share of cash-out refinance applications from May to June 2020: 0.5%
  • % of mortgage refinance applications for cash-out refinances in June: 34.5%
  • % change in the number of cash-out refinance applications from May to June 2020: 2.3%

No. 3: Louisville, Ky. 

  • % change in the share of cash-out refinances from May to June 2020: 0.6% 
  • % of mortgage refinance applications for cash-out refinances in June: 32.3%
  • % change in the number of cash-out refinance applications from May to June 2020: 1.3%


Methodology

The data in this study is derived from nearly 700,000 30-year, fixed-rate mortgage refinance requests from LendingTree users from Jan. 1, 2020 through June 30, 2020.

Rankings were created based on data derived from individual Metropolitan Statistical Areas or MSA levels.

LendingTree research analyst Jacob Channel contributed to this study.

 

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