Monday, January 22, 2007
People looking to extract equity from their homes have increasingly been turning to cash-out refinancing, industry observers say.Consumers cashed out a total of $82.8 billion during the quarter, down somewhat from $90.6 billion in the second quarter, according to Freddie Mac.
Overall, borrowers also need to be honest with themselves before tapping their home equity, especially if the reason for the cash-out isn’t a one-time cost, said Jennifer Wheary, a senior fellow at Demos, a nonpartisan public policy research and advocacy organization. She recently completed a report on the issue of home-equity extraction.
“In the short-term, they will feel a sense of relief,” she said, referring to those who use the cash to catch up with such things as credit-card payments or medical expenses. But the relief will be fleeting if they find themselves in the same situation — and this time without the cushion of home equity to fall back on, she said.