Massachusetts Cash-Out Refinance Rules & Guidelines

Home prices in Massachusetts rose 3.3% from a year ago, according to Zillow.com, to an average value of $433,800. If you own a home in Massachusetts and have been thinking about a cash-out refinance, now could be the ideal time to get it done.

Even better, interest rates for 30-year mortgages fell again this week to just 3.31%.

Between rising home prices and low-interest rates, doing a cash-out refinance could lower your interest rate and put tens of thousands of dollars of equity in your pocket. Could there be a better time to save on your mortgage and put cash in the bank, given the economic slowdown from the coronavirus pandemic?

Below is critical information to know about doing a cash-out refinance in Massachusetts.

Massachusetts Cash-Out Refinance Overview

Having a home in Massachusetts is a huge investment, with the median home price tipping the scales at more than $400,000. When you spend that much money on a home, it makes sense to want to upgrade it to make it more comfortable and to increase its value.

But home improvements are expensive. For example, one of the most popular home renovation projects is a kitchen makeover, which can cost between $14,000 and $40,000, according to Homeadvisor.com. That’s a lot of money. How will you pay for it?

Many Massachusetts residents have a lot of equity in their homes and interest rates are low, so a cash-out refinance can be the perfect way to lower your rate and get the cash for your kitchen remodel.

For example, say you want to do a full-blown kitchen upgrade that features new cabinets, tile floor, granite counters, lights, and appliances for $35,000. If you owe $200,000 on a $400,000 mortgage, you may be able to refinance it for $235,000 and take the cash to remodel your kitchen.

Rules & Guidelines on Massachusetts Cash-Out Refinance

You will need to qualify for your new mortgage and follow the regulations that apply to mortgage loans in Massachusetts. Expect to need a credit score in the mid-600s to qualify for a new loan, and your debt-to-income ratio should be well below 50%. You will only get the best interest rates if your credit score is well over 700.

The laws in Massachusetts require a minimum of 20% equity in your home and you cannot borrow more than 80% of your home’s value. State law requires the borrower to keep at least 20% equity in the home to prevent borrowers from overextending themselves.

Considerations With a Massachusetts Cash-Out Refinance

Pulling out equity when the value of your home is rising and with low-interest rates is usually a great deal. But as with any major financial decision, be sure to consider all aspects before making the final call to refinance:

  • Refinancing for cash out may not be the right move if you already have an interest rate that is well below 4%. Instead, consider a home equity loan, which is a second mortgage with a fixed rate.
  • Have you been paying on your mortgage for a long time? Refinancing for 30 years restarts your mortgage clock, so you might want to choose a 15-year or 20-year mortgage. The payments are higher, but you’ll pay off your loan faster and save tons in interest payments.
  • Are you using the cash for a good purpose? Most financial advisors recommend using equity for a purpose that pays you back. The most popular use of equity is a home remodel. Good choices for remodels that will pay you back when you sell are kitchen and bathroom upgrades.
  • Do you plan to move in a year or two? Keep in mind that the average closing costs in Massachusetts are $3,871. It’s smart to stay in the home long enough that your annual interest savings are greater than your closing costs.
  • You won’t qualify for the lowest interest rates unless you have a high credit score in the 700s. Try to pay down debt and make all payments on time in a year or so before you refinance.

Final Thoughts on Massachusetts Cash-Out Refinance Rules & Guidelines

Home prices in Massachusetts continue to rise, and homeowners usually have plenty of equity to tap. Interest rates are at record lows as of April 2020, so a cash-out refinance looks like a no brainer for many people. Ensure your credit score is high enough for the best rates, then talk to a mortgage lender today about refinancing.

Massachusetts Cash-Out Mortgage News

  • The US 30-Year Mortgage Rate Has Fallen Again: US long-term mortgage interest rates have fallen again for the third straight week as there is new evidence of severe damage to the US economy from the COVID-19 pandemic. Rates for a 30-year fixed-rate mortgage is now 3.31%. This does present a good opportunity for Massachusetts families to refinance their loans, however. (Realestate.Boston.com)
  • Why Isn’t Boston’s Housing Market Slowing Down? While the coronavirus has put millions of people out of work and has damaged the US economy, people are still able to buy real estate in Boston, in part because of the low-interest rates. It is possible now to buy a home or townhouse you could not afford a year ago with rates a point higher. Mortgage refinances also are soaring in the city. (Bostonmagazine.com)
  • Massachusetts Home Prices Up as Winter Eases, New Figures Show: Massachusetts home prices continue to rise at an average rate of 4.2%, even as the COVID-19 pandemic has slowed the economy overall. Many people in the state are rushing to refinance their mortgages and get cash out as home prices are holding steady and mortgage rates are dropping. (Boston.Curbed.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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