Homeowners Using Cash-Out Refis To Avoid Repeating History
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:
- Paying down credit cards as debt consolidation
- Making college tuition payments
- Financing home improvement projects
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.
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.
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.
- In-between jobs and buying a home? Your lender can do that mortgage now.
- Carrying debt from student loans? Your lender can exclude some of them now.
- Making a small down payment? Your lender has more options for you now.
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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