Low Mortgages Rates are Propelling Wave of Cash-Out Refinances
The continuation of favorably low interest rates has propelled a wave of cash-out refinances, the most we have seen since the financial crisis of 2008.
Many think this is cause for concern, but its not; at least not yet. Given the rapid growth in the home process in the last year, the share of cash-out refinances isn't terribly high. There were more during earlier housing booms, including the housing crash 15 years ago.
A cash-out refinance allows a borrower to swap their current loan for a new one with a higher balance. So, homeowners can pay off their old mortgage and still have cash left over. A recent report found that in 2020 the amount of equity tapped into through cash-out refinances increased by 42%.
These days, it appears that most borrowers are using the funds to pay down other debt and to update their homes. Home improvement spending sky-rocketed during the pandemic.
Homeowners are sitting on a lot of home equity right now and what a lot of people are doing is taking this money, getting a cash-out refinance, and using the cash to make renovations to their home. Many projects from adding a screened-in porch, updating a bathroom, creating a home gym or adding an official home office all add to overall value of a home.
These are smart moves to make as the improvements are actually going to help their home sell for a significantly higher amount of money in a few years.
It's important to do home improvements that are low cost but add the biggest value to your home.
Interested in looking into the amount of equity you could tap into? Reach out about a cash-out refinance.
Whether you are looking to pay off some debt or complete a home remodel, we can help guide you ever step of the way. Call today! 801.206.4343
*Source: Kiplinger Letter: Vol.98, No.10**
