Who Says You Can\'t Buy a Home! People looking to extract equity from their homes have increasingly been turning to cash-out refinancing, industry observers say. A big reason that people are tapping their equity through refinancing comes down to dollars and cents, according to Amy Crews Cutts, deputy chief economist with Freddie Mac. Because home-equity loans and lines of credit are most often tied to the prime rate, now at 8.25 percent, those options have gotten more expensive even as long-term mortgage rates have remained relatively low, with the 30-year loan averaging about 6.25 percent.

“It’s all about the prime rate,” said Michael Kodsi, chief executive of Choice Mortgage Bank in Boca Raton, Fla. A good number of his clients would rather take cash out through refinancing — whereby their mortgage rate will be fixed — than take out a loan tied to the prime rate, which has the potential to fluctuate and “could go higher down the road,” he said. Freddie Mac said 89 percent of the loans it owns that were refinanced in the third quarter of 2006 had loan amounts at least 5 percent higher than the original mortgage balances, the threshold for considering a loan to be a cash-out refinancing. It’s the highest share of cash-out refinance loans reported since 1990.

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