Home values are finally going up instead of down enabling homeowners to once again treat their houses like financial assets.
Equity is no longer a bad word. Equity is when the value of your home is more than the balances on your mortgages. The difference is your equity, your sweat and blood, your potential profits from selling in a increasing market, and now your ability to pull some cash out to catch up with the past.
Equity has been difficult in times past making HARP 1.0 and 2.0 the only viable refinance option for homeowners who are underwater. Today's market has more and more homeowners taking a bit of that equity to payoff the struggles of the last few years.
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Here are some examples of what increasing values plus cash-out refinances help homeowners accomplish:
- Payoff credit card balances that have increased because of the economy.
- Payoff some or all of your 2nd mortgage or home equity line of credit, especially the ones that are coming due or have potential rate increases.
- Pull out some money to remodel the home.
- Pull out some money for the kids college.
- Pull out some money and put it into a better investment opportunity.
Increasing interest rates will slow increasing values so the time is now. Many people were waiting for interest rates to get even lower before refinancing, missing out on the floor of the refinance boom. There is no need to miss out on the Cash-Out refinance boom.
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Just ask yourself these questions:
- Do the balances on my credit cards ever get lower?
- Does my car loan have an interest rate higher than my mortgage?
- Am I struggling living paycheck to paycheck?
If you own a home and answered yes to any of those questions, then you may be a candidate for a Cash-Out refinance. Even a 3.625% refinance into a 5.125% loan paying off debts with even higher rates may prove financially viable. If you are able to pull out a little more to invest and watch grow, then you may be better off in the long run, just be sure to check with your financial adviser.
