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Homeowners Using Cash-Out Refis To Avoid Repeating History

By Dan Green

Cash-out mortgage refinances are booming with U.S. homeowners right now, according to Freddie Mac and its quarterly Refinance Report; Today’s mortgage rates for conforming loans, FHA, USDA, and VA loans; and, the always-changing nature of the conforming mortgage guidelines.

Cash-Out Refinances Are Booming Right Now

Fool me once shame on you. Fool me twice… well you know the rest.

And, so do homeowners who are hitting the cash-out mortgage refinance hard.

New data from government-backed Freddie Mac shows that cash out refis accounted for 63 percent of all refinances made last quarter, marking the highest ratio of cash-out refinances since 2008.

This year’s resurgence in cash-out refis is the result of low mortgage rates and the rising values of U.S. homes. However, it’s probable that the rush is a different flavor last decade’s surge, which was characterized by people using home equity to leverage up on investments.

This year, homeowners may be acting defensively.

Cash-out refinances unlock a homeowner’s home equity, which converts an illiquid asset into cash. The cash can be used for anything, too:

Doing a cash-out refinance can also re-balance on your personal portfolio.

Remember: home equity is an asset and home values for the typical refinancing household are up 16% since the date of last mortgage.

This increase has created a massive asset overweight for a lot of U.S. homeowners.

Last decade, when home values dropped, some people were stuck with huge amounts of home equity and few other assets. This decade, homeowners are playing it differently.

So, if your home is up big in value, talk to your lender to at least discuss your cash out options.

Click here to get cash-out mortgage interest rates.

Today’s Mortgage Rates

I got a fever and the only prescription is more mortgage news.

Today’s rates for conforming loans, FHA loans, VA loans and USDA are all trending higher, raising monthly payments for active buyers of homes.

And, what are today’s mortgage rates? That depends.

Your mortgage rate is based on your loan size, your credit score, and where you live. How you pay your closing costs matters, too.

Loans with points typically come with lower rates, but paying points may not be good for your situation.

So, talk to your lender about your options and make the choice that’s best for you.

Click to get today’s mortgage rates.

The 68 Changes In Fannie Mae’s Guidelines

The more things change, the more they stay the same.

Except in mortgages. Things never stay the same. Everything changes.

Take last year.

Government-backed Fannie Mae made 68 changes in its official mortgage rulebook. Sixty-eight.

That’s more than one per week and changes like that change the way that mortgage loans are approved.

These changes are powerful — and also recently enacted —  which is why you can’t rely on random webpages or your Aunt Jenny in real estate to tell you whether you’re eligible to get a loan.

You got to talk with a lender because everything changes and, right now, mortgage rules are as loose as they’ve been in a decade.

Talk with a lender. It’s an excellent time to see what you can do.

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Written by Dan Green

Dan Green is a personal finance expert and the founder of Growella. His expertise has been cited by The Wall Street, NPR, and CNBC; and, his advice has helped millions of people make better choices with their money. Dan hosts the mortgage news show "The Mortgage Minute-and-a-Half" three times weekly on YouTube.

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