WASHINGTON – Americans in the second quarter tapped the smallest amount of home equity in a decade, showing households are focused on repairing tattered finances.

Owners took out $8.3 billion while refinancing prime home loans as borrowing costs dropped from April through June, down from $8.4 billion in the previous three months and the least in 10 years, according to a report today by McLean, Va.-based Freddie Mac. About 22 percent chose to reduce loan principal, matching the third-highest rate since records began in 1985.

Instead of extracting cash to binge on cars and vacations as in previous recoveries, owners are refinancing to improve terms and reduce mortgage payments. The mending of household balance sheets means consumers will be in a better position to join the recovery once employment picks up.

“It’ll put consumers on firmer ground going forward,” said Michael Bratus, an economist at Moody’s Economy.com in West Chester, Pa. “It’ll give consumers more confidence.”

A report Tuesday from the Conference Board in New York showed confidence dropped in July to a five-month low on concern about jobs and wages.

Americans may eventually become less pessimistic as they repair balance sheets and their financial situation improves. So-called cash-out loans, in which borrowers increase their loan amounts by at least 5 percent, accounted for 27 percent of all refinanced loans in the three months to June, capping the lowest three-quarter share on record. Cash-out refinances peaked at 88 percent in mid-2006.

“This is a rate-and-term refinance boom as opposed to a cash-out boom,” said Michael Larson, a housing analyst at Weiss Research in Jupiter, Fla.

“Five years ago you had people liquidating equity to finance debt-fueled consumption,” he said. “Now, refinancing gives them breathing room.”

Figures from the Mortgage Bankers Association signal the drive to take advantage of record-low mortgage rates has accelerated this month.

The group’s refinancing gauge for the week ended July 16 reached the highest level in a year. Refinance applications accounted for 79.4 percent of all mortgage requests, the most since April 2009.