Rates Are High, But Equity Is Higher

It might sound strange—why would anyone refinance when rates are sitting in the high 6s?

Because for many homeowners, the equity they’ve built is more powerful than the rate they’re giving up.

According to the latest reports, cash-out refinances made up 60% of all refinances in Q2 2025, the highest in three years. On average, borrowers pulled about $94,000 from their homes.

The Motivations Behind Cash-Outs

For most families, tapping equity isn’t about “playing the market.” It’s about solving real financial challenges:

  • Paying off consumer debt: Credit cards are running north of 20% interest. Rolling that into a mortgage—even at 6–7%—cuts costs dramatically.
  • Cash flow relief: Freeing up $600–$800 a month by eliminating high-interest payments can change a family’s budget overnight.
  • Home improvements: Kitchens, roofs, or adding living space—improvements that also add long-term value.
  • Life events: College tuition, medical bills, or helping kids get started.

Why the Math Still Works

It’s all about comparing interest cost and cash flow.

  • Consumer debt interest: often 18–24%
  • Mortgage debt interest: 6–7%

Even if your mortgage payment rises, the blended household cost often goes down when you consolidate. That’s what matters: your monthly out-of-pocket.

Alternatives Beyond a Cash-Out

For some, a full refinance doesn’t make sense. That’s where other tools come in:

  • HELOC (Home Equity Line of Credit): Flexible access to equity without touching your first mortgage.
  • HELOAN (Home Equity Loan): Fixed-rate installment loan secured by your home.
  • Blended-rate strategy: Keep your low-rate first mortgage and add a smaller HELOC/HELOAN to tackle debt or free up cash flow.

These options protect your best rate while still using equity strategically.

Check out tomorrow’s blog to learn how your equity can be even more powerful!

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