Have you been watching the news about COVID-19 and also been watching mortgage rates? Then you know we are seeing some of the lowest rates for 30-year mortgages ever. Rates have fallen as low as the low 3’s since March 2020.
Also, home prices in Delaware have been rising in recent years, so this could be the perfect time to refinance your mortgage and pull cash out. Below is more information about a cash-out refinance in Delaware.
Delaware Cash-Out Refinance Overview
Zillow.com reports the median home price in Delaware is $257,000, and many homeowners have owned their properties for more than 10 years. This means they usually have a lot of equity they can tap for home improvements. Doing a cash-out refinance to improve your home can be a great move because it increases the price of your home whenever you sell it.
With COVID-19 affecting the US economy and mortgage rates, this is an ideal time to save on your mortgage and pull out cash.
A cash-out refinance means replacing your current mortgage with a new one with a higher balance and (usually) a lower rate. A refinance could be a good move for you on your Delaware home if you can save between .5% and 1% on your loan. The higher loan balance is because you are pulling out some equity.
For example, if you own a Delaware home with a $250,000 mortgage and you owe $100,000, you may have $150,000 in equity in the home. If you want to remodel your kitchen and master bathroom, you might want to pull out $30,000 with a refinance. So you would have a new mortgage of $130,000 but a lower interest rate.
If you have a 4.5% rate now and can refinance to 3.5%, you could save $50 to $100 per month with the higher loan balance. That’s a good deal.
Rules & Guidelines on Delaware Cash-Out Refinance
Doing your cash-out refinance in this economic downturn can be a smooth move because rates have dropped with investors fleeing to bonds, which typically lowers mortgage rates. But you need to qualify for a loan, and mortgage lenders in Delaware and other states have been making it harder to qualify for a mortgage.
For instance, JPMorgan & Chase requires you to have a 700 credit score to get a mortgage. Wells Fargo’s new rules say you need a 680 to get an FHA loan.
Investipedia.com states you should have a DTI (debt to income ratio) of no more than 43% of your income. This means your total debt payments per month should not exceed 43% of your gross monthly income.
Further, most lenders in Delaware prohibit you from taking out more than 80% of your home’s value. You will need to leave some of the equity in the property when you refinance.
Considerations with a Delaware Cash-Out Refinance
Are you interested in pulling cash out of your Delaware home and saving on your monthly payment? A cash-out refinance could be the perfect move, but consider these points first:
- Closing costs in Delaware are high. You can expect to pay closing costs of up to $8,000 for refinancing a mortgage of $200,000 or $300,000 in this state. You can roll these costs into your loan, but it increases your monthly payment and you are paying interest on your closing costs. Before you refinance, think about how long you will be in your home. You would need to stay in the home for years to recoup your closing costs with your mortgage interest savings.
- Your loan is guaranteed by your home. If you cannot pay the higher mortgage, you will lose the property. So be sure your job is secure and your salary is stable.
- If you have an interest rate under 4%, you may want to keep your first mortgage and get a home equity instead. Your rate will be higher with a second mortgage, but you still can pull out cash and pay less than you would for a personal loan.
- Most Delaware homeowners refinance with a 30-year loan. But this means they are starting over on their payments. If you are getting close to retirement, do you want to be paying a mortgage when you aren’t working? If not, consider a 15-year loan instead.
Final Thoughts on Delaware Cash-Out Refinance Rules & Guidelines
With the low rates during the COVID-19 pandemic, refinancing and pulling out cash can be a fantastic choice. You can rehab your home and add to its value, and pay less interest.
But know that it is harder to get a mortgage right now, so pull a credit report and see where your credit is. If your FICO score and debt to income are good, you may want to refinance before mortgage rates inevitably rise.
Delaware Cash-Out Mortgage News
- This is What a Delaware Cash-Out Refinance Could Save You: The COVID-19 pandemic has caused mortgage rates to drop to the lowest in history. Mortgage rates are down one point from a year ago. The average savings are $60 for every $100,000 you borrow. If you bought a $250,000 home in Delaware with a 4.58% rate and a $50,000 down payment you would pay about $1022. With a refinance at 3.87% in Delaware, you could save at least $80 per month, and possibly pull out cash. (Moneywise.com)
- Home Prices Are Warming Up in Delaware: Because of low mortgage rates, it is a great time to buy or sell a home in Delaware. It also is a fine time to refinance your mortgage and pull out cash. Home values in the state are rising at 1% per year. (Moneywise.com)
- Delaware Home Prices Grew Faster in 2018 Than Any State But Oregon: The average price of a home in Delaware increased by 3.9% during the first three months of 2018. Now that COVID-19 has hit the US, prices in Delaware have not yet dropped significantly and interest rates are low, so refinancing is a great option. (Delawareonline.com)