Louisiana Cash-Out Refinance Rules & Guidelines

Louisiana home prices have been rising at 2.4% annually, according to Zillow.com. With rising prices and low-interest rates during the COVID-19 pandemic, a lot of homeowners are wondering if now is the time to do a cash-out refinance.

Getting a new mortgage now could set you up with a low-interest rate and put cash in your pocket to do the home renovations you have been dreaming of for ages. It is also worth considering during your refi because it is uncertain what the current economic situation is going to do to home prices in the near future.

Ready to take advantage of the equity in your home? Below is more information about doing a Louisiana cash-out refinance.

Louisiana Cash-Out Refinance Overview

Zillow reports the median home price in Louisiana is $170,388. For most Louisianians, their home is the biggest investment of their lives. To increase the value of that investment, renovating and upgrading the property is a smart idea when you can afford it. But doing a home renovation can cost $10,000, $20,000, or more. Instead of running up credit cards with a 20% interest rate, homeowners often pull cash out of their home with a low-interest rate.

A cash-out refinance replaces your first mortgage with another with a bigger mortgage balance. You take the amount over your original balance and put it in your pocket. That is the equity that you can use to fund your home improvement project.

For example, if you want to fix up your kitchen with new cabinets, flooring, and appliances, you can easily spend $20,000. If you owe $75,000 on a $175,000 mortgage, you may be about to do a cash-out refinance for $95,000. You can take that $20,000 and remodel your kitchen to modern standards. Depending on the rate you get, your payment may not even change that much.

Rules & Guidelines on Louisana Cash-Out Refinance

Like in any state, you need to qualify for a cash-out refinance in Lousiana. Most qualified homeowners need at least a 640 to 680 credit score. You will get the best interest rates if your credit score is over 700. Also, better rates go to Louisianians with debt-to-income ratios of about 36%.

You also need to have 20% equity in your home to qualify for a cash-out refinance. Homeowners may not take out more than 80% of their home’s value, either. If you meet all of these rules, you may be able to get a cash-out refinance loan in Louisiana.

Considerations With a Louisiana Cash-Out Refinance

With rising home values (for now) and low-interest rates, getting a cash-out refi in Louisana sounds like a great deal! It is, but it is wise to keep these considerations in mind so you know all sides of the issue:

  • Be ready to pay closing costs. The average closing costs in Louisiana are $3,407. This matters because you have to pay closing costs on any new home loan. You might consider rolling the costs into the loan or paying a slightly higher rate. But the best option to save you the most money is to pay them at the closing table.
  • If you are pulling cash out of your home to pay off debt, that can make sense. But remember you are putting your house on the line when you do that. Also, you cannot tax deduct the mortgage interest on the new loan if you do not use the cash for home improvements.
  • Have a rate around 3.5% right now? You might be better off with a second mortgage, such as a home equity loan. Keep your low-interest first mortgage and pull out cash with a low-interest home equity loan instead.
  • Taking out a new mortgage means you are restarting the payment clock again. If you paid 15 years into your mortgage, do you really want a new 30-year mortgage? Consider a 15-year or 20-year mortgage so you can pay off your loan faster and save thousands in interest costs.

Final Thoughts on Louisiana Cash-Out Refinance Rules and Guidelines

As of April 15, 2020, rates for a 30-year fixed-rate mortgage were about 3.3%. The economic slowdown has led to a slide in mortgage rates that could be a great deal for Louisiana homeowners who want to lower their payment and pull out cash. If you can qualify, you might want to get a cash-out refinance now while rates are low and home values have not yet dropped significantly.

Louisiana Cash-Out Refinance News

  • Effects of Coronavirus on Louisiana Home Market Likely to Be Felt Soon:As of March 2020, the real estate market in Lousiana, especially in Lafayette and Acadiana, was still strong. Buying activity was still stronger in March 2020 than it was a year ago. This means it might be a good time to refinance and pull out cash before prices begin to drop. (Theadvertiser.com)
  • Home Values Heating Up in Louisiana: As of the end of 2019, home prices in Louisiana were rising about 1% year with a median price of $147,000. Many homeowners were taking advantage of the solid price increases to refinance and get cash. This trend is continuing now during the COVID-19 pandemic because rates are so low and prices have not cratered – yet. (Moneywise.com)
  • Some Mortgage Lenders Are Expanding Operations During COVID-19: Several mortgage lenders are expanding operations during the pandemic to handle the influx of cash-out refinance applications. This is occurring in hot markets such as Baton Rouge and Shreveport, Louisiana, as well as in several cities in Georgia and Massachusetts. (Housingwire.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.

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