The Consumer Financial Protection Bureau (CFPB) published a report on financial outcomes for borrowers who took cash-out mortgage refinances, finding that their credit scores typically rose sharply immediately after refinancing and then gradually declined but remained above pre-refinance levels. The analysis also confirms that cash-out proceeds are often used to pay down non-mortgage debt, particularly credit card and auto loan balances. Using data on borrowers from 2014 to 2021, the report finds that “pay off other bills or debts” was the most common reason for cash-out refinancing, selected by more than 50% of surveyed cash-out borrowers each year from 2014 to 2019 and by more than 40% in 2020 and 2021, with “home repairs or new construction” the second-most common reason. Before the transaction, cash-out borrowers had mean credit card balances about USD 4,000 higher and mean student loan balances about USD 4,000 lower than other homeowners, while auto loan balances were similar; at refinancing, credit card and auto loan balances fell substantially (with no comparable drop in student loan balances), and credit card balances and use rates later trended back toward but did not reach pre-refinance levels within a year.
Consumer Financial Protection Bureau 2025-01-24
Consumer Financial Protection Bureau report finds cash-out refinance borrowers pay down credit card and auto debt while credit scores remain above pre-refinance levels
The Consumer Financial Protection Bureau (CFPB) report reveals that borrowers who undertook cash-out mortgage refinances saw an initial sharp rise in credit scores, which later declined but remained above pre-refinance levels. Analyzing data from 2014 to 2021, the report indicates over 50% of borrowers used cash-out proceeds to pay down non-mortgage debt, particularly credit card and auto loans. It also notes that credit card balances and usage rates decreased significantly at refinancing but trended back toward pre-refinance levels within a year.