Almost nine out of 10 homeowners who [tag]refinance[/tag]d during the second quarter of this year “cashed out” additional money — often tens of thousands of dollars and more — according to mortgage investment giant [tag]Freddie Mac[/tag]. The 88 percent cash-out refinancing rate was close to the all-time record, and could surpass it later this year. Meanwhile, the typical refinancer hasn’t been scouring the market for an interest rate lower than his or her existing first mortgage.

[tag]Cash-out[/tag]s may be booming, but they are not a new phenomenon. They’ve existed for years as a financial tool to extract equity tied up in real estate and to convert it to immediately spendable money. During the [tag]refinancing boom[/tag] years of 2003 and 2004, for example, anywhere from a third to a half of all refinancers pulled out some additional cash. However, the overwhelming majority of borrowers during the go-go refinancing years chose traditional [tag]rate-reduction replacement mortgage[/tag]s where the new balance approximated the old balance, and the new monthly payment was lower than the old.

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