Americans are facing record levels of debt, leading to a rise in cash-out refinances, with 59% of all refinancing transactions in Q2 involving withdrawing money from homes. Homeowners are using the cash to pay off high-interest debt like credit cards and auto loans.

As of June, Americans had $5.44 trillion in non-mortgage debt, while homeowners have record levels of equity at $11.6 billion. Most borrowers are willing to trade lower mortgage rates for cash, with recent borrowers adding 1.45 percentage points to their rate in exchange for an average of $94,000.

Cashing out at today’s rates can benefit homeowners with significant credit card debt, allowing them to reduce monthly payments. Many are choosing to tap into their home equity to pay off consumer debt, with one client paying off $155,000 and saving $2,500 monthly.

Homeowners like John Cola Jr. are refinancing their mortgages to pay off high-interest debt, with rates as high as 24%. Despite giving up ultra-low rates, many are reducing overall monthly payments, with some seeing immediate benefits in credit scores and debt reduction.

There are multiple options to access cash from a home, including home equity lines of credit and home equity loans, each with varying interest rates. Financial experts urge caution when using homes for debt consolidation, as it carries risks despite potentially lower interest rates compared to credit cards. Cashing out can reduce monthly debt payments, but borrowers need to address the root cause of debt. Refinancers often see credit card balances rise post-refi, warns CFPB study. Broker Rich Flanery cautions against using home equity to pay off debt, citing recurring financial pitfalls. Financial planner Claire Boston advises on long-term financial goals.

Read more at Yahoo Finance: House-rich, cash-poor homeowners are tapping their record-high equity to cut their debts