We have to keep an eye on this because cash-out refis were a cause of concern in the run-up to the 2008 financial crisis as borrowers increasingly sought refuge in their homes to generate extra finances.
But when home prices fell, many homeowners were left owing more on their homes than they were worth.
Cash-out refis surged 42% year over year in 2020.
With a cash-out refi, homeowners pay off their old mortgage and start a new one that allows them to have extra cash left over.
On average, borrowers who took a cash-out refi last year withdrew $50,000, which is down from $59,000 the year before.
Economists say they aren't concerned—at least yet.
After all, home prices are still rising. During the financial crisis in 2008, home prices started to drop.
Source: New York Federal Reserve office and Freddie Mac.
