Mississippi Cash-Out Refinance Rules & Guidelines

Zillow.com reports the average home price in Mississippi is $127,500, and with record-low mortgage rates, many homeowners in the state are choosing to pull equity out of their homes with a refinance.

Since March, mortgage interest rates for a 30-year loan have fallen to as low as 3.29%. Interest rates rarely fall this low. If you want to drop that monthly payment and pull cash out to remodel your home, think about applying for a Mississippi cash-out refinance as soon as you can. Remember, when the COVID-19 pandemic passes mostly into history, rates will probably rise. This is a unique opportunity.

Mississippi Cash-Out Refinance Overview

When you buy a house in Mississippi, you may pay between $100,000 and $200,000. Businessinsider.com reports the median home listing price in the state is $189,000. Even with relatively low prices in Mississippi, it still is a huge investment to most people. That is why most homeowners want to keep up their property and upgrade it when they can.

But say you look at that old, outdated kitchen and want to do a full remodel. You might have to spend $20,000 or $30,000. That’s a lot of cash. What about a personal loan? That’s a possibility, but the interest rate will be high.

Another good option is a cash-out refinance. A cash-out refi means you pay off your first mortgage with a new one with a higher balance. You refinance your house for what you owe plus the amount of home equity you want to take out. You will have a bigger mortgage balance, but you will have a lower interest rate, AND have cash in your pocket for remodeling.

For instance, if you have a $200,000 home loan and owe $100,000, you have approximately $100,000 in home equity. If you want to take out $25,000 for your kitchen remodel, you can refinance the property for $125,000 and take the excess cash. Also, if you can drop your mortgage rate by a point, you could save $100 or $150 on your monthly payment.

Rules & Guidelines on Mississippi Cash-Out Refinance

Since COVID-19 hit the United States in February, mortgage lenders have tightened their lending standards. Getting a cash-out refi could be even more challenging, but it is possible with a good credit score and steady employment.

You may need at least a 680 credit score to get a cash-out refinance for home loans backed by Freddie Mac or Fannie Mae. Also, it is typical to need a 36% debt to income ratio, or DTI. This means your total monthly debt payments cannot exceed 36% of your gross income. If you are refinancing an FHA loan, you may be able to have a higher DTI, but check with your lender.

Further, you need to have 20% equity in your Mississippi home to do a refinance. Having a loan-to-value above 80% is not allowed and some lenders may only let you have an LTV of 75%. It depends on the lender, but things are getting stricter during this economic downturn.

Considerations with a Mississippi Cash-Out Refinance

The COVID-19 pandemic has been a gut punch to the world economy. But it has created some financial opportunities for homeowners who have an opportunity to lower their rate to an all-time low and get cash with a very low cost. But it is always wise to think about all sides of a cash-out refi before you make the decision:

  • Closing costs in Mississippi average $2,158. Homeowners should think about these costs as they think about refinancing. The best option is to pay your refi closing costs at the closing table. You also can roll them into your loan, but you will pay interest on them as long as you are paying your mortgage. Think about how long you are going to stay in your home. If you move 18 months after you refinance, you will not recoup your closing costs. A cash-out refinance is wisest for the homeowner who intends to live in the property for a few years.
  • What is your current interest rate? Many mortgage experts say you should save at least .5% on your mortgage to refinance it. If you already have a rate in the 3’s, consider doing a home equity loan instead. You can get the cash you want from your home and still have a low-interest rate with this second mortgage.
  • Making your mortgage larger has risk. Can you definitely afford the higher payment? Do not increase your mortgage payment unless you are sure your job is secure and you can afford it.
  • If you have paid for years on your mortgage, refinancing into a 30-year loan may not be a smart move. Think about refinancing into a 15-year loan. Your payment will be higher but the rate will be lower and you will pay off the home faster.

Final Thoughts on Mississippi Cash-Out Refinance Rules & Guidelines

Mortgage rates are at record lows, so this could be the perfect time to do a cash-out refi. Just be sure you have stable employment and you can afford the higher payment. Interest rates will probably rise once the coronavirus is in the rearview mirror, so this is a unique opportunity, don’t miss the boat!

Mississippi Cash-Out Mortgage News

  • Bucking National Trends, Houses and Cars Selling Big in Mississippi: Homes and cars are selling well in Mississippi, which is something you may not expect in the uncertain time of the COVID-19 pandemic. But the coronavirus has had a major lowering effect on interest rates, which is creating demand in real estate. The number of homes for sale has dropped as well. (Magnoliastatelive.com)
  • Home Values Declining in Mississippi Amid Coronavirus Crisis: Home values have declined in Mississippi -0.8% from one year ago. The median value for a home in 2020 in this state is $265,000. Still, mortgage rates are at record lows, so homebuyers have a chance to get a low payment, and homeowners can refinance at a very low rate. (Moneywise.com)
  • Equity-Rich Homeowners See Rosy First Quarter: Homeowners’ balance sheets stayed stable in the first quarter of 2020, including in Mississippi, with homeowners four times as likely to be equity-rich than seriously underwater. With interest rates at record lows, many people are deciding to refinance and pull out cash. (MPAmag.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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