A Vero Beach cash out refi may soon be a thing of the past, and has in fact, already tumbled from a peak of $320 billion in 2006 to just $32 billion in 2013.
During the housing boom of the mid-2000's, a Vero Beach cash out refi became a popular outlet for homeowners. Homeowners were encouraged to think of their homes as ATM's they could easily withdraw cash from, in the form of a cash out refinance.
Decrease in Vero Beach cash out refi popularity is due to three reasons:
1. A Vero Beach cash out refi is closely tied to an increase in home prices.
Despite jumping 11.5% year-over-year nationally in 2013, inflation adjusted housing prices are still down about 30% from the bubble peak.
In addition, analysts don't expect home prices to continually rise as they did in the bubble years, which could make borrowers less likely to withdraw equity from their homes. Home prices are projected to increase by 4% in 2014 and 2% in 2015 followed by a 2% increase on average in the long term. As a result, many borrowers would still be unable to use a Vero Beach cash out refi due to the lack of home equity.
2. A shift in borrower mentality from using their homes as an ATM.
Homebuyers are making more of a concerted effort to pay down or pay off their debts instead of expanding or upgrading. As lending standards tightened after the crash, borrowers' credit quality has improved.
3. A Vero Beach cash out refi is not always cheap when compared to alternatives like home equity loans.
While the interest rates on a Vero Beach cash out refi are usually lower than those on a home equity loan, they can become expensive once additional loan level pricing adjustments are factored into the equation.
Depending on the FICO/LTV combination, a borrower could pay up to 3% of their mortgage balance upfront or 0.75% additional annual interest rate for a cash out refi. Additionally, cash-outs are not available to high LTV borrowers. Guidelines stipulate that a Vero Beach cash out refi is not permitted for borrowers with LTV greater than 85. Finally, closing costs are required for cash-out refinances, but they are not needed for home equity loans.
Given these 3 factors, it would seem unlikely for the Vero Beach cash out refi to make a comeback or return to pre-crash levels.
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