Home Owners Overestimate Their Equity

The amount home owners estimate their home is worth is growing out of proportion with appraisers’ estimates, with the gap widening for the first time in six months, according to Quicken Loans’ latest Home Price Perception Index.

On average, appraisers’ estimates were about 2 percent lower than what home owners expected in February. The Quicken Loans study compares actual appraised values to what home owners who are refinancing estimate their home is worth at the beginning of the mortgage process.

Appraisers’ estimates were most often higher than home owners’ in the Western region of the country.

Source: Quicken Loans

More Home Owners Tap Into Equity, ‘Conservatively’

As home values rise, more home owners are tapping into their equity with cash-out mortgage refinances. But they’re not taking out nearly as much as they did in the past.

The average amount taken out by owners was more than $60,000. According to Black Knight Financial Services, the average loan-to-value ratio after the refinance was 67 percent – the lowest level ever. On average, borrowers then left 33 percent of equity still in the home after the cash-out refinance.

Forty-two percent of mortgage refinances last fall had borrowers who took cash out of their homes and did not refinance just to get a lower interest rate – the highest share since 2008, CNBC points out.

Source: “Owners Cautiously Taking Cash Out of Homes,” CNBC (Feb. 1, 2016)