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Cashing out


Overall, borrowers also need to be honest with themselves before tapping their home equity, especially if the reason for the cash-out isn't a one-time cost, said Jennifer Wheary, a senior fellow at Demos.

"In the short-term, they will feel a sense of relief," she said, referring to those who use the cash to catch up with such things as credit-card payments or medical expenses.

But the relief will be fleeting if they find themselves in the same situation -- and this time without the cushion of home equity to fall back on, she said.