In harsh times such as these, homeowners are usually able to find comfort in a cash-out refinance that replaces their loan with a new one at a larger amount than the current loan balance. At that point, the money between the two mortgages can be withdrawn to help you get by, should you enter a financial hardship. However, a BankRate report
reveals that with unemployment rates climbing across the country, lenders are becoming more hesitant and implementing stricter requirements for borrowers seeking the cash-out option.
"Cash-out refinances reached a 10-year high in the fourth quarter of 2019, the latest figures available, according to Black Knight. Homeowners drew more than $41 billion in equity out of their homes in the quarter," according to Bankrate
. "The surge of refinance applications has overwhelmed some mortgage lenders. But the backup appears to be slowly easing as lenders adapt to new ways of doing businesses under stay-at-home restrictions."
If you have already decided to enter forbearance, you will not be eligible to refinance your loan. While the cash-out option is there, it can also come with a number of caveats that may steer homeowners in another direction. In addition the time it takes for a cash-out refinance, or any refinance for that matter to close is going to take much longer. Borrowers simply may not have the time to wait if they are in a pinch.