The Cash-out Refinance Awakens

December 3rd, 2015

A young family of four and their dog sit in a park surrounded by fall leaves

Rising Property Values, Low Mortgage Rates Spur Holiday Refinancing

A new force has emerged this holiday season, a financial force that has not been felt in many, many years. This financial force is all around us, it surrounds us and penetrates us, it’s in our homes, and it has the power to do many, many good things…

This powerful new force is known by another, more common term—“Home Equity”. With interest rates near record lows and property values continuing to increase across the country, more and more homeowners are tapping into the power of their home equity and utilizing a smart financial tool known as the “cash-out refinance”. The force of home equity is strong this year–according to Black Knight Financial Services, cash-out refinances are up 68% from this time in 2014 and are at their highest volume in five years.

For those homeowners who able to master the force of their home equity and do a cash-out refinance, substantial savings await. According to the same source, the average cash-out refinance results in the homeowner putting nearly $65,000 in their pocket. When you factor in record low interest rates, favorable lending terms, and your mortgage interest tax deduction, this powerful force can overcome the dark side of almost any household budget situation.

Most importantly, a cash-out refinance can accomplish a variety of financial goals for you and your family—such as helping you manage your holiday spending, pay for home remodeling or repairs, and/or eliminate other costly debts such as credit cards, student loans, or lines of credit.

The timing of a doing a cash-out refinance couldn’t be better. As we all know, Americans love their holiday shopping and this year is no exception. According to the National Retail Federation, holiday retail sales are projected to increase a healthy 3.7% in 2015, to a whopping $630 billion, which is far above the 10-year average of 2.5%. Many homeowners spend more during the holidays than they expect and end up having to make difficult financial decisions in the months that follow. A cash-out refinance can effectively eliminate that financial stress.

However, the time to act is now. Economists have felt what may be a great disturbance in the force—in the form of the Federal Reserve. In mid-December, the Federal Reserve is widely expected to start raising interest rates. Although the Fed’s shift in monetary policy will likely involve small, incremental increases in interest rates, economists predict that the Fed will continue increasing interest rates throughout 2016 until they’ve reached a satisfactory level or as long as the economy keeps growing, which could be a long time.

As Luke Skywalker once said, “I have a bad feeling about this.”

So if you’re a homeowner who’s been needing some cash for any number of reasons, to remodel a kitchen or a bathroom, eliminate credit card debt, or to help pay for your child’s college tuition, you would be wise to consider the benefits of a cash-out refinance. For those of you who doubt the power of your home equity, we find your lack of faith disturbing.

We wish all of you the best of luck this holiday season. And may the force be with you…always.

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