With interest rates at historic lows and recent increases in Tucson home values, many jittery homeowners impacted by the coronavirus outbreak are looking to refinance to get their hands on cash.
Refinancing has been on the rise for months, but has jumped 479% so far in March, according to Zillow economists.
Is taking cash out of your home a good idea right now?
“Homeowners should use a conservative approach when deciding if they should tap into their equity,” said Kim Dees, senior vice president and Southern Arizona division manager for WaFd Bank Arizona. “Using these funds for home improvements or paying off high interest debt may be reasons to consider; however, you do not want to draw down the equity too far.”
She said homeowners should note how long it took for their homes to regain equity after the long downturn.
Last year, Tucson ranked second in the United States out of 100 metro areas in house price appreciation, according to the Federal Housing Finance Authority. Values increased an average of 10.3% over 2018, compared to 4.9% in the overall U.S. market in that time.
Todd Teta, chief product and technology officer with Attom Data Solutions, said each homeowner’s situation is unique and the decision to refinance should be weighed with how much financial cushion one has and what their needs are.
“If someone really needs the money now, then recent home appreciation is there to draw on,” he said. “But in the current, uncertain situation with coronavirus and its economic impact, home values could take a hit.”
If a home’s worth declines, drawing it down with a loan would compound that, Teta said.
Even before the current virus had its impact, lower interest rates had fueled a record number of refinances nationwide.
In the fourth quarter of 2019, homeowners took $1.27 million refinance mortgages, Attom data shows.
Experts suggest approaching your mortgage lender and asking for some relief during this time or to postpone payments for a while.
“Homeowners should contact their lender sooner than later,” Dees said. “Reach out to your bank or mortgage company when it is clear you cannot make the payment.
“Do not wait until the payment becomes past due.”
And, if you do pull money out of your home, risks such as stock market investments are not recommended, Teta said.
“A housing crisis could happen if the coronavirus outbreak stalls the economy for much longer,” he said. “We are headed into peak buying season and if very few people are out there looking, then prices stand a very good chance of falling.
“If home values fall, that could throw some people who take out loans against their home equity under water (and) could put more people at risk of foreclosure and a potential cascading series of bad events for the housing market.”
Dees advised homeowners who do refinance to prioritize paying off debt.
“Pulling equity out of your home for financial survival may be necessary (so) determine where you can make the biggest impact to reduce your expenses,” she said. “The remaining funds should be saved for an emergency fund.”
If unsure on how to proceed, consulting a financial advisor is recommended.
Photos for March 27: Tucson gets by during coronavirus pandemic
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The doors are still open at Sacred Art Tattoo on 1024 E. 6th St., as of Friday, March 27, 2020, Tucson, Ariz.
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Seth Nadeau, left, and his son Anthony Nadeau get out of the house for a couple of game so horse under cloudy skies on the courts at Christ Church United Methodist, March 27, 2020, Tucson, Ariz.
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Victoria Quintero, 5, holds her sign as her mother, Vanessa, waves to the teachers and administrators from John E. White Elementary School and Pistor Middle School during a Car Parade through the neighborhood on March 27, 2020. The teachers and administrators drove their cars through the neighborhood to say hello to their students from their cars.
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Teachers and administrators from John E. White Elementary School and Pistor Middle School cheer and wave to their students during a Car Parade through the neighborhood on March 27, 2020. The teachers and administrators drove their cars through the neighborhood to say hello to their students from their cars.
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Standing, Kai Morales, left, and his twin brother, Kristian, hold up their signs as Karim, 9, and their mother, Angelica, sit in the bed of the truck along W. Nebraska Street during a Car Parade on March 27, 2020. The teachers and administrators drove their cars through the neighborhood to say hello to their students from their cars.
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Students of John E. White Elementary School and Pistor Middle School stand along W. Nebraska Street and wave to their teachers during a Car Parade on March 27, 2020. The teachers and administrators drove their cars through the neighborhood to say hello to their students from their cars.
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Teachers and administrators from John E. White Elementary School and Pistor Middle School line up along W. Canada Street before the start of their Car Parade on March 27, 2020. The teachers and administrators drove their cars through the neighborhood to say hello to their students from their cars.
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The noted bull testicles on the statue outside Casa Molina at Speedway and Wilmot, usually painted in various schemes and wild colors, now sporting a surgical mask.
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Pfc. Gustavo Escalera, of the Arizona National Guard, waves in the next car to his station at the Southern Arizona Community Food Bank on March 27, 2020. The Arizona National Guard has been activated to help the demanding need to fill and handout food boxes for people in Tucson and five counties in southern Arizona. Thirty troops arrived in Tucson on Thursday and another thirty are expected. According to Spc. John Randall, the troops are here to fill in the gaps in logistics to help keep up the production of putting together and handing out food boxes.
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Spc. Nicholas McCormick, of the Arizona National Guard, waits for the next car to pull up at the Southern Arizona Community Food Bank.
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Spc. Emilio Maldonado, of the Arizona National Guard, pushes a several bags down an assembly line at the Community Food Bank of Southern Arizona on March 26, 2020. The Arizona National Guard has been activated to help the demanding need to fill food boxes for people in Tucson and five counties in southern Arizona.
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Spc. Gabriel Molina, of the Arizona National Guard, fills bags with food items on an assembly line at the Community Food Bank of Southern Arizona on March 26, 2020. The Arizona National Guard has been activated to help the demanding need to fill food boxes for people in Tucson and five counties in southern Arizona.
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Hoover Zhu, owner of Old Peking, poses for a portrait inside a closed Old Peking at Old Peking , 2522 E. Speedway Blvd., in Tucson, Ariz., on March 25, 2020. Zhu closed Old Peking on Thursday March 25 due to the Coronavirus Disease (COVID-19).
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Chef Du Liyuan makes a take out order at Chef Wang, 356 E. Grant Rd., in Tucson, Ariz., on March 25, 2020. Chef Wang, a local Chinese restaurant, is open for take out but is considering closing due to the Coronavirus Disease (COVID-19).
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Before Tuesday’s change in policy, Arizona residents traveling to New York had to quarantine for 14 days. New Jersey and Connecticut also removed their travel restrictions.
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An empty baggage carousel at the Tucson International Airport, on March 26, 2020.
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Wendy Fu, owner of Chef Wang, processes a take out order at Chef Wang, 356 E. Grant Rd., in Tucson, Ariz., on March 25, 2020. Chef Wang, a local Chinese restaurant is open for take out but is considering closing due to the Coronavirus Disease (COVID-19).
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Chairs tilted in on tables at La Cocina located at 201 N. Court Avenue, on March 26, 2020.
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Sun sets over a dark and locked Hi Corbett Stadium, home to the Arizona Wildcats baseball team, as the city begins its second week under COVID19 restrictions, March 26, 2020, Tucson, Ariz.
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Downtown Congress Streets is mostly deserted just before 8 p.m. as the city begins its second week under COVID19 restrictions, March 26, 2020, Tucson, Ariz.
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The lanterns from the Reid Park Zoo's Asian Lantern Festival sit in a fenced compound after the zoo's closure ended the display weeks early as the city begins its second week under COVID19 restrictions, March 26, 2020, Tucson, Ariz.
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Residents stay spaced while out getting some air and watching the Rillito River flow near Craycroft as the city begins its second week under COVID19 restrictions, March 26, 2020, Tucson, Ariz.
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Jayden Simmons, right, 12, runs football drills with coach Bobby Rodriguez, owner of Jet Sports Training, at Silverlake Park, in Tucson, Ariz., on March 25, 2020. Due to gyms being closed, Rodriguez is taking classes and training outside to parks with little to no equipment.
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A man wearing a mask watches traffic go by while waiting for the bus on N. Alvernon Rd., in Tucson, Ariz., on March 25, 2020.
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Gloves, a mask and hand sanitizer sit on the counter at Chef Wang, 356 E. Grant Rd., in Tucson, Ariz., on March 25, 2020. Chef Wang, a local Chinese restaurant is open for take out but is considering closing due to the Coronavirus Disease (COVID-19).
