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Cash-Out Refis Become Harder To Secure

Navi Persaud
Apr 21, 2020
Woman working from home at laptop.

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 At that point, the money between the two mortgages can be withdrawn to help you get by, should you enter a financial hardship.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.

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