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Myth-Busting Cash-Out Refinances: What Homeowners Get Wrong

Homeownership is one of the biggest milestones that many Americans strive to achieve. That’s because it can also help to set them up financially.

Many homeowners have more financial options than they realize. If they need cash, they may be able to tap into their home equity through a variety of loans, including the often misunderstood cash-out refinance.

Cash-out refinances often get a bad rap because of the misconceptions surrounding the mortgage. Some believe the loan, which replaces your existing mortgage and provides you with additional cash, is only for emergencies. Others assume it’s too risky or comes with too many costs.

The reality is that, when used wisely, a cash-out refi can help homeowners consolidate debt, fund major expenses, or pay for home repairs and improvements. It can even help them set up new streams of income.

“You can use the cash-out for so many things. It doesn’t have to be debt consolidation only,” said Hamest Manoukian, a New American Funding loan officer based in Whittier, Calif. “You can build an accessory dwelling unit (ADU) in the back of your home, buy an investment property, or even fund a second home at the beach.”

Cash-out refinances explained

A cash-out refinance replaces your existing mortgage with a new one, typically for a larger amount. You then receive the difference as cash.

The loan allows you to access the equity you’ve built in your home without selling the property. This can help you to fund big-ticket expenses, such as paying off high-interest debt or starting a business.

U.S. homeowners collectively held more than $35 trillion in equity as of the second quarter 2024, according to the U.S. Federal Reserve.

The average homeowner had more than $311,000 in equity as of the third quarter of 2024, according to real estate data firm CoreLogic.

That’s a lot of untapped potential for those looking to improve their financial position.

However, homeowners should ensure that a cash-out refinance makes sense for them financially. They’re generally best for homeowners in need of larger sums of money.

You will have to pay closing costs for these loans, which is why they may not be the right fit for those in seek of smaller dollar mounts. Closing costs often total thousands of dollars, depending on the size of the loan, the value of the home, and other factors. (The costs typically include loan origination fees, title insurance, appraisal fees, and any legal costs.)

Once the loan closes, your mortgage payments may be higher as well. That’s because the amount you owe has increased.

You may also have a higher interest rate. This could happen if current mortgage rates are higher than what they were when you purchased your home or last refinanced your loan. 

Myth #1: Cash-out refinances are only for emergencies

Many believe that a cash-out refinance should only be used as a last resort. That’s not always true. While it can help if you’re undergoing financial hardships, it’s far from the only use case.

“If your property permits, you can build an ADU, rent it out, and create cash flow to help pay your mortgage. That’s immediate appreciation in your home,” said Manoukian.

Cash-out refinances can also be used to buy second homes or investment properties.

“Imagine cashing out on your single-family home to put 30% down on a four-unit rental property,” said Manoukian. “Now you have four sources of income from one decision.”

Myth #2: Cash-out refinances are too risky

The idea that cash-out refinancing puts you at financial risk often stems from a misunderstanding of how it works. If you borrow responsibly and have a clear plan for the funds, it may reduce your financial stress.

For example, consolidating high-interest credit card debt into a lower-interest mortgage payment can save you money over time.

Additionally, mortgage rates expected to come down a bit over the course of 2025 and beyond.

Homeowners who need the cash now can take out the loan. Then if mortgage rates drop as expected, they can look into refinancing their loan again to lock in a lower rate. (They will typically have to pay closing costs again in a new refinance.)

Myth #3: You lose home equity permanently in cash-out refinances

Some homeowners hesitate to tap into their homes, fearing they’re endangering their equity.

However, as property values rise and you pay down your mortgage, you can often rebuild equity over time.

Home prices have surged over the last decade. Nationally, the median home list price rose nearly 65% from November 2016 through November 2024, according to Realtor.com data.

Over time, homeowners may be able to reposition themselves for better loan terms or additional equity gains.

“You’re not just borrowing money, you’re setting yourself up for a stronger future,” said Manoukian.

Hamest Manoukian, NMLS # 485360

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The Kitchen Makeover You Didn’t Know You Needed: 6 Trendy Updates for 2025

The kitchen has long been the heart of the home, and as we step into 2025, many homeowners are considering redesigning this essential space.

From style makeovers to innovative storage solutions, the trends shaping kitchen renovations this year reflect a desire for both functionality and beauty.

About four-fifths of homeowners, 81%, are choosing to change the style of their kitchens during renovations, according to the 2025 Houzz Kitchen Trends Study. The home design and renovation platform surveyed more than 1,600 homeowners for the study.

“Homeowners want visual warmth,” said Susan Serra. She is a certified kitchen designer and founder of Scandinavian Made, a company with a focus on aesthetics and functionality throughout the design process. “Kitchens are becoming less utilitarian in their look and design.”

While kitchen remodels can be costly, refinancing your mortgage or choosing a home equity loan could help you to fund these improvements without relying on high-interest loans or credit cards.

The typical major kitchen remodel cost $60,000, while a minor remodel set homeowners back about $20,000, according to Houzz.

If you’re considering a kitchen upgrade or just curious about what’s trending, these insights will guide you through the most exciting shifts in kitchen design.

1. Traditional style makes a comeback

More homeowners are expected to choose a traditional style of kitchen in 2025, according to the Houzz survey. 

About a quarter of kitchen renovations are expected to choose this blending of traditional and modern elements. That’s up about five percentage points from the previous year.

“The addition of vintage pieces in different forms—chairs, tables, and art—can nudge the kitchen design toward a more gracious, traditional direction,” said Serra.

One way to achieve this style is to incorporate a mix of materials in cabinetry or focus on small featured areas, such as a coffee nook or an island.

If you want to blend traditional charm with modern utility, consider incorporating wood finishes and vintage accents. They can transform your kitchen into both a practical and nostalgic space.

2. Expanding your kitchen

More and more homeowners are choosing to make their kitchens bigger. About 35% of people who remodel their kitchens add more space, often by removing walls to open up to living or dining rooms.

However, combining spaces presents its own set of design challenges.

“The goal when opening up a kitchen to another room should be to create as seamless a transition as possible,” said Serra. “Sharing the same flooring material across spaces helps create flow, making the combined areas look more connected and spacious.”

A common challenge in open-plan kitchens is managing the noise generated by appliances and kitchen activity. To minimize sound, consider noise-dampening flooring, adding rugs, and using upholstered furniture.

Quiet appliances, such as dishwashers and vent hoods with cushioned bottoms, can also reduce kitchen noise.

3. Engineered quartz is the top countertop materials

One of the most important elements of kitchen design is the countertop. Engineered quartz remains the go-to choice for many homeowners as its both durable and low maintenance.

“Quartz is nearly indestructible,” said Serra. “It resists staining and is highly durable. However, the longevity of quartz depends on the quality of installation and the quartz itself.”

Serra advises homeowners to avoid low-cost quartz options, as they may not perform as well over time.

To test quartz’s resilience, Serra recommends taking a large sample and exposing it to various foods and substances, leaving it overnight to analyze the results.

This will give you a clear understanding of how well your chosen material holds up to real-life use.

4. Creative kitchen island upgrades

The kitchen island continues to be a central feature in many kitchen renovations as homeowners use it to maximize both storage and functionality.

Serra highlights one of her favorite island upgrades: recessing the island’s toe kick from the standard 3 inches to 12 inches. This recessed space at the bottom of the island can give it a “floating” appearance.

For those seeking more storage, short island cabinets or islands with hidden appliances are also creative ways to maximize efficiency without compromising on style.

5. Aging in place: stylish and functional solutions

Designing a kitchen for aging in place is becoming a key consideration for older homeowners.

“Induction cooktops are one example of a functional, yet safe feature for aging-in-place designs,” said Serra. “They heat the area directly below the cooking vessel, keeping the surrounding area cool and reducing the risk of burns.”

About 62% of homeowners installed pull-out cabinets. Other aging-in-place features, such as additional lighting, non-slip flooring, and lower cabinetry, were also popular.

6. Lighting trends: enhancing ambiance and functionality

Lighting continues to be a big part of kitchen design, with recessed lights and pendants, with 73% and 71% of homeowners respectively choosing these options. However, homeowners are also exploring additional lighting options that can enhance the ambiance and functionality of their kitchens.

To elevate the space, consider adding wall-mounted lighting over artwork or decorative sconces at focal points. This helps the kitchen feel less utilitarian and more like a living area.

“Accent lighting, like under-cabinet lighting, can create a lovely atmosphere and serve as nightlight,” said Serra. “Adding lighting inside drawers, cabinets, and the pantry helps to locate items easily and improves visibility.”

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The Federal Reserve Kept Interest Rates Steady. What Does That Mean for Housing?

The question on just about every prospective homebuyer’s mind is when mortgage rates will finally fall. However, it may take a bit longer than anticipated.

The U.S. Federal Reserve kept interest rates steady at its first meeting in 2025. This is likely to keep mortgage rates hovering around 7% over the short term, much to the dismay of cost-conscious homebuyers.

“We’re going to be focusing on seeing progress on inflation or alternatively some weakness in the labor market before we consider making adjustments,” said Fed Chair Jerome Powell at the Jan. 29 press conference. He was referring to what it would take for the Fed to lower rates again.

Mortgage rates are separate from the Fed’s short-term rates, but generally follow the same trajectory. So, when the Fed indicates a rate cut is likely, mortgage rates often fall.

With the Fed keeping interest rates higher for longer, mortgage rates are expected to remain elevated.

“There’s no reason for the Fed to have moved rates given that the unemployment rate is still relatively low,” said New American Funding Chief Investment Officer Jason Obradovich. “Inflation is not coming down. It’s not getting closer to the Fed’s target.”

Higher mortgage rates are a blow for homebuyers who hoped lower mortgage rates could make purchasing properties more affordable. It also impacts recent homeowners who hope to eventually refinance their mortgages to a lower rate. A drop in rates could mean a lower monthly mortgage payment.

“The direction of rates will really determine home sales,” said Obradovich. 

The Fed began raising rates in 2022, jacking them up 11 times to combat inflation. Inflation waned and unemployment ticked up a little, so the Fed started lowering rates in September 2024 to give the economy a bump.

However, the Fed hasn’t cut as deeply or as often as many would prefer due to fears that inflation could roar back. That means mortgage rates could rise—or fall—this year.

“If inflation or inflation expectations come down then mortgage rates will come down,” said Obradovich. “However, if for some reason inflation or inflation expectations go up, then rates could go up.”  

The new administration will also play a role in which direction mortgage rates move. When the economy is stronger, rates tend to be higher. When it’s weaker, the Fed tends to lower rates to give it a jolt.

“There is a huge unknown on what the new policies will be in the next year and how that will affect the economy,” said Obradovich. 

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Navigating a Shifting Market: What Buyers and Sellers Need to Know in Early 2025

As the calendar flips to 2025, the real estate market is anything but predictable. For buyers and sellers alike, it’s a time of adjustment, especially with mortgage rates holding steady at around 7%.

Buyers are feeling the squeeze, while sellers are facing competition from more homes on the market. Despite more home tours taking place in early 2025, pending sales have not seen the same rise, according to a recent Redfin report.

“People are tired of waiting for house prices or mortgage rates to come down. It isn’t likely that either will happen,” said Dusty Lloyd, a loan officer from New American Funding based in Dana Point, Calif. “If rates come down, they can always refinance.”

So, what does this mean for those navigating the market?

Homebuyers are adjusting to elevated mortgage rates

Many real estate experts predicted mortgage rates would fall in early 2025. And that’s just what happened last week, when rates fell back below 7%.

While rates came down a bit, they are still above recent levels. This elevated rate might seem daunting, some buyers have come to terms with it, accepting that rates aren’t likely to drop anytime soon. Others are hoping for a future decrease, trying to decide whether it’s better to buy now or wait.

Sellers are also having to adjust to buyers reaching their financial limits. Some are making concessions, such as paying the commission of the buyer’s real estate agent, making costly repairs, or contributing to the buyer’s closing costs.

In some housing markets, prices have plateaued or have even dipped. Buyers who purchase properties in these areas may be able to refinance their loans when mortgage rates eventually go down.

“House prices will increase, [but] you cannot refinance the house price,” said Carmen Quinones, a loan consultant for New American Funding based in Durham, NC.

Modest housing demand doesn’t equal more sales

While home tours have increased slightly in early 2025, they haven’t yet translated into a significant rise in sales, according to Redfin. In fact, the number of homes going under contract fell 3.1% year-over-year in the four weeks ending Jan. 5, according to the Redfin data.

The increase in home tours could simply reflect a seasonal uptick now that the holidays are over. People may be more inclined to start their home search after the festive season, but that doesn’t always lead to offers.

For sellers, this means that while interest in a property might be high, it doesn’t guarantee a sale.

Opportunities for homebuyers in a competitive market

However, competition is still fierce for the most desirable homes on the market that are priced to sell. That means buyers should be prepared to act fast and make their offers stand out.

Many homes see multiple offers within 24 hours of hitting the market, according to the Redfin report. Waiting too long could mean missing out on the home you want.

The key to succeeding in a competitive market is to make your offer as attractive as possible. Offering more earnest money to show that you’re serious about following through with the deal but should be done with caution. Buyers can talk to their real estate agents about options like escalation clauses.

Time is also important. If you offer quickly when a listing first appears, you can be ahead of others who might wait to see how the market changes.

The sooner you get in the door, the better your chances of landing your ideal home.

What home sellers should consider to snag a sale

For sellers navigating the housing market in early 2025, the good news is there still aren’t many homes on the market. Properties in good condition, in desirable locations, and are priced right will generally still appeal to buyers, despite high mortgage rates.

However, sellers still have to put in the work. A well-staged home can help buyers imagine themselves living there and make your property more appealing.

Marketing also plays a crucial role. You may want to work with a real estate agent to come up with a plan. Using high-quality listing photos are also a must in ensuring your listing stands out.

The right presentation can make all the difference in attracting serious offers.

Will mortgage rates fall in 2025?

Looking ahead, the question on everyone’s mind is whether mortgage rates will continue to drop later in 2025.

If they do, there could be a surge of buyers entering the market, leading to more competition over homes and potentially higher prices. That’s bad for buyers, but good for sellers.

So, for those wondering whether to act now or wait, it’s key to consider your own personal situation.

“As hard as it sounds, don’t focus on the rate. Focus on the monthly payment. If you can afford the payment and love the house, buy the house,” said Dianne Steffey, a New American Funding loan officer based in San Antonio, Texas. “Rates will eventually come down. But home prices will continue to rise, and by waiting you may price yourself out of the market.”

Carmen Quinones Loan Consultant NMLS # 2509688

Dusty Lloyd Branch Manager NMLS # 247106

Dianne Ayala Steffey, Branch Manager NMLS # 267658

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The 5 States Attracting the Most New Residents—And the 5 States People Are Leaving

America has always been a nation on the move—and lately that move has been to Texas.

The Lone Star State, along with other more affordable states in the South, attracted the most new residents in 2024, according to U.S. Census Bureau data.

Meanwhile, California and Northeastern states with higher home prices and cost of living lost the most residents last year.

However, the number of folks relocating to new parts of the country has slowed down considerably since the pandemic. Many people relocated during this stretch when they could suddenly work remotely.

“In Texas, a ton of people moved in and home prices went up,” said Lance Lambert, founder of ResiClub, a media and research company that covers the U.S. housing market. “Now the market is going through normalization. But in the long term, there will be demand and the housing market will continue to get bigger.”

Why Texas is the top destination for movers

About 85,267 new residents moved into Texas in 2024, according to the Census Bureau.

While the state has high property taxes, it doesn’t have a state income tax and home prices are also reasonable. The median home list price in Texas was $359,500 in December—well below the national median price tag of $402,500, according to Realtor.com data.

While home prices in the state have jumped about 26% over the last five years, they have been coming down since peaking in the summer of 2022.

“Higher mortgage interest rates are stopping people from moving,” said Stephanie Douglass, co-founder of the brokerage Open House Austin. “It’s actually a relief because it was unsustainable.”

Brad Pauly, owner of Austin-based Pauly Presley Realty, said that tech jobs in the city, which is known as Silicon Hills, are a huge motivator.

“It has brought a lot of people from around the country,” he said.

The 5 states with the most new residents:

  1. Texas
  2. North Carolina
  3. South Carolina
  4. Florida
  5. Tennessee

The states the most people are leaving

Not surprisingly, the biggest losers in population were in more expensive states, such as California, New York, New Jersey, and Massachusetts. Illinois also made the list.

The median home list price in California was $715,000 in December, according to Realtor.com data. The state lost about 239,575 residents in 2024.

The rest of the top five states losing residents all had home prices over the national median of $402,500, except for Illinois. The median price tag in the Prairie State was $292,450 in December.

In the Northeast, which garnered four of the five top spots, has been stymied by the lack of homes on the market. That low inventory coupled with strong demand for housing has kept these housing markets hot, despite the number of residents leaving.

Meanwhile, builders put up so many new homes in Texas and Florida that prices have come down.

“The irony of the data is that those states with decreasing net migration are some of the strongest housing markets,” said Lambert. “[Meanwhile,] Texas and Florida are two of the softest housing markets in the nation.”

The 5 states losing the most residents:

  1. California
  2. New York
  3. Illinois
  4. New Jersey
  5. Massachusetts