Arizona Cash-Out Refinance Rules & Guidelines

Home prices have risen dramatically in Arizona since a year ago – an average increase of 7.5%, according to Zillow.com, making Arizona a ‘very hot’ market by the real estate website’s standards.

Because interest rates are low during the COVID-19 pandemic and Arizona home prices are still rising, you could benefit by doing your cash-out refinance. Below is more information to know about cash-out refinances in Arizona.

Arizona Cash-Out Refinance Overview

Are you thinking about taking advantage of rising home prices and low-interest rates in Arizona to do a cash-out refinance? Refinancing and taking cash out has a lot going for it.

The biggest advantage of a cash-out refinance is it can lower your interest rate and give you the money you want to improve your home.

For example, if you refinance your mortgage for more than what you owe, you can take out thousands of equity to remodel your kitchen or add a family room extension. These popular home upgrades make your home more enjoyable and add value to the property.

Plus, if you use your equity to improve your home, the interest you pay is tax-deductible. Projects the IRS specifically mentions include:

  • Building an addition to your home
  • Replacing the roof
  • Replacing the HVAC system
  • Remodel the kitchen or bathroom

Rules & Guidelines on Arizona Cash-Out Refinance

Cash-out refinances are more popular in Arizona today because of rising home values and low-interest rates. Arizona was hit hard by the US housing crisis in 2008.

That is why the US government created special mortgage programs for Arizona borrowers, such as HARP, HAMP, and Save Our Home Arizona Program.

To qualify for a cash-out refinance in Arizona, you need to have a balance on your mortgage of less than 80% of the current appraised value. For instance, if you have a mortgage balance of $200,000 and your home is worth $300,000, you have a loan to value of 66%. You may be able to pull out up to $40,000 in equity if you qualify.

Also required are a decent credit score in the mid-600s to mid-700s and a debt-to-income ratio of approximately 45%, depending on the Arizona lender.

Considerations With an Arizona Cash-Out Refinance

Getting a lower interest rate and pulling out equity from your Arizona home sounds great, right? It is, but keep in mind these considerations before you send in your application:

  • Closing costs: Every new loan requires closing costs. In Arizona, closing costs typically are 1.16% to 1.74% of the home’s value. That adds up to $3,474, on average. You might consider rolling the closing costs into the loan or paying a slightly higher interest rate over the loan’s term. But one way or another, closing costs are always paid by the borrower. Make sure the savings that you get from the lower interest rate are worth the cost of the new loan.
  • You are restarting your mortgage. If you have paid 20 years on a 30-year mortgage and take out a new 30-year loan, you are paying on the home for 50 years. But you can nix this problem by refinancing into a 10 or 15-year mortgage. The payments are much higher, but you will save tens of thousands in interest, and pay off your home much faster.
  • You already have a low-interest rate. You still can do a cash-out refinance if you already have a low-interest rate, but why do that? The other option is to take out a home equity loan. This is a second mortgage on your home with a fixed interest rate. You can keep your low rate on your first mortgage and still get the cash you want for your home upgrades. Rates on second mortgages are a bit higher because they are a higher risk to lenders.
  • Improve your credit score before you apply. Interest rates may be at rock-bottom, COVID-19 lows, but you may not qualify with a 640 credit score. Pay off debt to increase your score quickly, if you can.

Final Thoughts on Arizona Cash-Out Refinance Rules & Guidelines

Home prices are rising quickly in Arizona and you will rarely see interest rates lower. You could be at just the right time to do a cash-out refinance. If you have a solid credit score, at least 20% equity, and intend to stay in the home for at least a few years, talk to your Arizona mortgage lender today about a cash-out refi.

Arizona Cash-Out Mortgage News

  • Refinancing on the Rise in Tuscon as Homeowners Scramble to Survive COVID-19 Outbreak: Interest rates are at historic lows and Tuscon home values are increasing, so many nervous homeowners are looking to refinance their mortgages to get money in their hands quickly. (Tucson.com)
  • Mortgage Refinance Could Save Money – Even If Your Loan Is New: Thousands of homeowners in Arizona could benefit today by refinancing their mortgages for cash out, even if they bought as recently as May 2019. (Tucson.com)
  • Coronavirus May Clobber Overvalued Housing Markets: It is estimated that homes in the US are 1.5% overvalued as of the end of 2019. In Arizona, it is believed homes are overvalued by 10-14%, so refinancing your mortgage for cash out as soon as you can is probably smart. (Eastbaytimes.com)

Author: Bryan Dornan

Bryan Dornan is a financial journalist and currently serves as Chief Editor of Cash Out Refi Tips.com. Bryan has worked in the mortgage industry for over 20 years and has a wealth of experience in providing mortgage clients with the highest level of service in the industry. He also writes for RealtyTimes, Patch, Buzzfeed, Medium and other national publications. Find him on Twitter, Muckrack, Linkedin and ActiveRain.

Leave a Reply

Your email address will not be published. Required fields are marked *