The Federal Reserve has made two large interest rate cuts in 2020 to incredible lows. In order to capitalize on this, many homeowners might seize this opportunity in order to refinance their mortgage, and that would be a smart move depending on your current rate and other factors.
When rates are as low as they are, some homeowners jump at the chance to do a “cash out refinance,” which allows them to refinance their mortgage for more than what they owe in order to take the extra cash they receive to pay down additional debt. Obviously, there are pros and cons to this strategy with the major downside being that you transferred your unsecured debt into secured debt by tying the loan repayment in with your refinance. That means if you ever are in a position of financial instability and cannot afford your (higher) mortgage payment, foreclosure may now be a real possibility.
Contact Ross, Quinn & Ploppert, P.C. at 610-323-5300 to schedule a consultation to see if doing a cash-out refinance has any risks for you or if bankruptcy would be a quicker, easier, and more beneficial strategy for your financial future!