Growing Demand for Cash-Out Refinances

By Robert Jacovetti

With home values steadily rising since the mortgage crisis of 2008, more and more homeowners are looking to tap into their home equity in order to pay down debt or make big purchases. According to Freddie Mac, in the third quarter of 2016, the total amount of home equity cashed out rose to 17.6 billion dollars. That number is 66% greater than the amount of equity cashed in the same period of 2015. However, even after the large increase, the overall dollar value for cash-out refinances is still below the 30 billion dollar number seen during the recession. With that being said, the increase has been large enough that financers such as SoFi and Fannie Mae introduced a cash-out refinance option specifically for paying down student loan debt.

Homeowners may see cash-out refinances as an aid in paying off their part of the $12.35 trillion of household debt in America. There are signs that problems with the high levels of consumer debt are growing. For instance, the American Bankers Association reported that late-payment rates on credit cards issued by banks, and on auto loans, rose to their highest levels in more than two years in 2016. Also, the prime rate increased to 3.75% in the fourth quarter of 2016. If the Federal Reserve proceeds with rate hikes, the prime rate will continue to increase, making credit card debt more expensive. For that reason, more individuals may turn to cash-out refinances.

Since the recession, loans have become much more stringently underwritten. Therefore, homeowners may be looking at cash-out refinances as being their best option. But is it really there the best option? The issue with taking a cash-out to refinance is that it is much riskier than a credit card loan. Individuals who take a cash-out refinance are trading their unsecured debt for debt that is tied to their home. Thus, if individual defaults on a cash-out refinance, the consequences are much more serious. The homeowner can lose their home. If you are looking to determine whether a cash-out refinance is the best option for your situation, an attorney with experience in consumer protection and alternatives to bankruptcy may be able to help.

When you are buried under credit card and loan debt, it can be difficult to find a solution. Collection agency calls and a mailbox full of bills make it hard to choose your next step. Fortunately, there are debt relief options available that put financial control back in your hands. It may not feel like it, but you do have options. Contact the law office of Robert Jacovetti, P.C. today at (516) 217-4488 for a free phone consultation. Find the best solution to your financial situation from a competent, knowledgeable attorney. Bob Jacovetti helps clients in NYC, Queens, and Brooklyn gain control of their finances once and for all.