In mid-2006 just before Florida home prices and those nationwide began diving, 88 percent of people refinancing their mortgages took cash-out of the equity in their homes, thereby adding to their debt load. Between 2005 and 2009, Americans lost an unprecedented 7 trillion dollars in the equity in their homes. Both factors have led to the increase in borrowers who now owe more than the value of their homes resulting in an ongoing rise in foreclosures and bankruptcies.
Most recent 2009 data from Freddie Mac shows that only 27 percent of re-financiers took cash-out and 33 percent put cash-in to lower the balance of their mortgages. Advantages of lowering the amount of a mortgage may qualify you for a lower interest rate and avoid the necessity for PMI (private mortgage insurance).
If you are thinking of tapping the equity in your current home to make a down payment on your eventual Florida retirement home, be aware of the hazards that still exist. If you already have your Florida home, think twice before you take cash out of it to take that dream vacation, or buy that new, luxury car.
