Not Cashing In on Cashing Out: An Analysis of Low Cash-Out Refinance Rates

Ethan Hossain, Igor Livshits and Collin Wardius ()
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Collin Wardius: https://economics.ucsd.edu/graduate-program/about/grad-profiles/cohort-2022/wardius-collin.html

No 26-01, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: Lowering a borrower’s interest rate is one of the most effective ways to reduce a borrower’s debt burden. Mortgage refinancing offers a chance to shift debt balances from high-interest loans into a low-interest mortgage through “cashing out” some of the home’s equity. Using anonymized data on mortgage refinancing behavior, we find that over half of borrowers with high-interest loans and available home equity do not take advantage of their cash-out opportunities. While the cash-out “surcharge” can rationalize this pattern, we leverage a policy change at Fannie Mae that eliminated this surcharge for student-loan borrowers and find that the presence of a student loan does not significantly affect borrowers’ propensity to cash out.

Keywords: mortgage refinancing; cash-out refinancing; student loans; cash-out sur charge; household finance (search for similar items in EconPapers)
JEL-codes: D14 G40 G51 G53 (search for similar items in EconPapers)
Pages: 40
Date: 2026-01-07
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Working Paper: Not Cashing In on Cashing Out: An Analysis of Low Cash-Out Refinance Rates (2023)
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DOI: 10.21799/frbp.wp.2026.01

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