More than 80% of borrowers who refinanced in the third quarter chose the "cash out" option, withdrawing $14.6 billion in equity out of their homes, according to government-sponsored mortgage corporation Freddie Mac. That is the highest share of cash-out refis since 2007.

The trend attests to the current state of the U.S. economy, which is more than nine years into an expansion that has lifted home values sharply but raised worker pay at a much slower pace. Now, many are finding their homes to be a tappable source of wealth.

"Home equity is the big pot of gold," said Sam Khater, the chief economist at Freddie Mac.

The increase is also a reminder of how rising mortgage rates are roiling the market. Higher rates, which make buying a home more expensive, are slowing down home sales.