Black Knight Financial Services’ latest Mortgage Monitor Report (MMR) revealed the amount of equity available to borrowers before hitting a combined loan-to-value ratio of 80 percent hit $4.7 trillion in 2016.
That amount represents an equity growth of $570 billion throughout 2016 that pushed total equity to its highest level since 2006. Nearly 40 million homeowners (39.5 million) now have a mortgage with tappable equity.
“Cash-out refinance data suggests that [homeowners] have been increasingly tapping that equity, though perhaps more conservatively than homeowners had in the past,” Black Knight Data & Analytics Executive Vice President Ben Graboske said in a press release. “In Q4 2016, $31 billion in equity was extracted from the market via first lien refinances.”
“While that was the most equity drawn in over eight years, borrowers are still tapping equity at less than a third of the rate they were back in 2005, and they’re doing so more prudently. In fact, the resulting post-cash-out loan-to-value-ratio was 65.6 percent, the lowest on record,” Graboske added.
The MMR also found 68 percent of tappable equity belongs to borrowers with current interest rates below today’s 30-year interest rate, and 78 percent of this equity belongs to 27 million borrowers with credit scores of 720 or higher.
According to the MMR, St. Louis, Mo. (17.4 percent) has the highest negative equity rate of any U.S. city; Chicago has the most properties (168,000) underwater; and Denver (0.3 percent) and Ft. Collins, Colo. (0.2 percent) have the lowest negative equity rates.