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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsAmericans Are Taking Cash Out of Their Homes---And It Is Costing Them
Many Americans who need cash are taking it out of their homes. The trade-off: higher interest rates.
Over the past two years, a big chunk of homeowners took on higher interest rates when they refinanced to tap their home equity. These cash-out refinancings, as they are known, free up money homeowners can use to pay down credit-card debt, renovate or invest in a new property.
Nearly 60% of cash-out refinancings in 2018 came with higher interest rates, the biggest share since before the financial crisis, according to Black Knight Inc., a mortgage-data and technology firm. This year, that number fell to around 44% of cash-out deals, but it remains at more than three times its average between 2009 and 2017.
This corner of the mortgage market illuminates the crosscurrents in the U.S. economy: After roughly a decade of rising home prices, homeowners are flush with record amounts of home equity they can tap. But many Americans remain short on cash and are increasingly relying on debt to fund their lives.
https://www.msn.com/en-us/news/us/americans-are-taking-cash-out-of-their-homes-and-it-is-costing-them/ar-BBYpCxu?li=BBnb7Kz
Shit like this went on under Bush II. Here we go again.
Demonaut
(8,926 posts)then why not?
Yavin4
(35,445 posts)Interest rates are still at historic low levels, but they won't be for much longer. The Fed has to raise interest rates within a year or so, and all this debt that folks are taking out will have even higher rates of interests which will trigger defaults.
Demonaut
(8,926 posts)It's never a good idea to take on more debt. Never.
Demonaut
(8,926 posts)Yavin4
(35,445 posts)The key to financial security is avoiding debt at all costs.
Demonaut
(8,926 posts)True Blue American
(17,988 posts)So many are falling for the reverse mortgage bit, too. I despise Tom Sellick when I see him doing that sincere bit. There is no way he needs that money and suckering Seniors is the lowest.
Demonaut
(8,926 posts)Yo_Mama_Been_Loggin
(108,192 posts)Not a very sound policy really. This is why a lot of mortgages ended up under water around 2008.
Demonaut
(8,926 posts)most helocs are less than 6.5% and it's deductible and most have no prepayment penalty now, they didn't in 2008.
Demonaut
(8,926 posts)hedda_foil
(16,375 posts)Demonaut
(8,926 posts)PoindexterOglethorpe
(25,895 posts)When I purchased my current home in 2010 I got a 30 year mortgage at 4.75%. About a year ago I re-financed to include the cost of solar panels, and got a 20 year mortgage (meaning the pay-off date is the same as before) at 3.75%. Lucky me, I currently have a slightly greater income than before, and I'm currently paying an extra $300/month on my mortgage, which means, if I can continue those extra payments, I'll pay off the loan about 8 years early. Hooray for me!
I want to add, because this is really important, that when I bought this place, as much as I'd like to have taken out a 15 year loan, there was simply no way I could afford those higher payments. And the mortgage company was happy to lend me the money for 30 years. I am grateful that I am now in a position to pay off early, but if I weren't I'd still be content because I have a payment I can afford in a home I really love.
Yo_Mama_Been_Loggin
(108,192 posts)Good for you if that's the case.
Unless it's an emergency or a consolidation of debt 2nd mortgages are not a good idea.
PoindexterOglethorpe
(25,895 posts)No money taken out.
Initech
(100,102 posts)elleng
(131,102 posts)Exactly
meow2u3
(24,772 posts)with a home equity loan. He went bankrupt and had to move in with his son in another state.
llmart
(15,552 posts)So many of them buy too much house in the "good times" and then think the good times will continue forever. If you live long enough, you'll see the pattern of how the boom times always go bust.
Whatever happened to living within or below your means?