Zillow.com states the median home price in Missouri is $165,000, and prices rise approximately 3.9% per year. While the home purchase market is slowing overall in Missouri, many homeowners are eying low-interest rates and thinking about refinancing and pulling out cash while they still can.
During March and parts of April, a 30-year, fixed-rate mortgage could be had at 3.29%. It is almost unheard of to see such low rates. Now could be the perfect time to refinance the mortgage on your Missouri home and pull out cash for renovations?
Interested? Keep reading to learn more about a cash-out refi in Missouri.
Missouri Cash-Out Refinance Overview
If you buy a home in Missouri, you may pay between $150,000 and $250,000. It’s a lot of money! That is why Missouri homeowners like to keep up their homes and upgrade them when possible. But renovating a kitchen or adding a family room extension can be $30,000 or more. What is the best way to get money?
With the COVID-19 pandemic hitting the US economy hard, you could have a great chance to access the cash you need and lower your rate with a cash-out refinance.
A cash-out refinance allows you to pay off your first home loan with a new one at a lower rate, but with a higher balance. You are pulling out some of your hard-earned equity for home improvements, so you have a bigger mortgage. But with a lower rate, you might not see much of a payment change.
For example, if you have a $200,000 mortgage and owe $100,000 on it, you have about $100,000 of equity. If you want to remodel your kitchen with new cabinets, granite counters, modern appliances, and concrete floor, you could pull out $30,000 in equity and have a new mortgage of $130,000 with a lower interest rate.
If you have a current rate of 4.5% and lower it to 3.5%, you still could save a few bucks per month in payment with a higher balance. It’s a good deal, if you qualify.
Rules & Guidelines on Missouri Cash-Out Refinance
The COVID-19 pandemic has caused lenders to tighten their lending standards, so you have to have better credit scores and debt to income ratios (DTI) to qualify for a cash-out refinance. Lenders also are checking out your income more carefully and might even verify you still are employed up to the day of closing.
Regarding credit, you will need a 680 FICO score to do a cash-out refinance if your loan is backed by Fannie Mae or Freddie Mac. Also, you should have a debt to income ratio of 36%. This means your total debt payments each month cannot be more than 36% of your gross monthly income. If you are refinancing with an FHA-backed lender, you may be able to have a higher DTI of up to 50%.
Also, you must have 20% equity in your Missouri home to qualify for a cash-out refinance. Laws also prohibit a loan-to-value of more than 80%. So you will have some equity left in the home, just in case prices decline so you do not owe more than the home is worth.
Considerations with a Missouri Cash-Out Refinance
The COVID-19 pandemic is a major economic problem in the US, but it has created an opportunity for some Missouri homeowners to drop their interest rates and access their equity. Before you do so, please consider the following points:
- The average cost of closing a home loan in Missouri is $1,856. You can wrap those costs into the new loan, but it will increase the balance and you will pay interest on closing costs for the duration of the loan. Consider how long you plan to live in the house before you refinance; if you save $100 per month on your mortgage refi, you have to live in the house about 18 months to break even. Moving sooner? You might reconsider refinancing.
- How much is your interest rate on your mortgage today? If you have a rate under 4%, you may want to rethink a refinance. You might be better suited to a home equity loan or home equity line of credit. Access your equity without affecting your first mortgage, and still get a low rate.
- Increasing your mortgage balance has risks. You owe more to the lender and if your job goes south, you could lose your home.
- If you have paid on your mortgage for years, you may not want another 30-year loan. Why start over on your payments? A 15-year loan has a 30-40% higher payment, but you will pay less interest and pay off your home much faster.
Final Thoughts on Missouri Cash-Out Refinance Rules & Guidelines
Interest rates are low and home prices in Missouri have been increasing. This could be the best time for a cash-out refinance! Rates will definitely not stay this low forever, so check your credit score and talk to your lender today about a cash-out refi.
Missouri Cash-Out Mortgage News
- Refinances in Missouri Surge in Record Rate Environment: Mortgage rates across the nation hit a record low of 3.29% in March, and financial institutions are working hard in Missouri to keep up with all the refinance applications. Banks and credit unions in the state have seen a strong uptick for refinancing mortgages, with some Missourians pulling out cash. (SBJ.net).
- It’s a Feeding Frenzy – COVID-19 Not Slowing Down St. Louis Housing Market – Yet: Selling a home during COVID-19 takes creativity, masks and gloves, but the housing market has not been hit in St. Louis yet. The average selling price in the area is $329,000, and people are taking advantage of low-interest rates to buy homes or refinance their current mortgages. (KMOV.com)
- Missouri Home Sales Overall Are Down: Missouri’s overall housing market has taken a hit from COVID-19, with home sales down 20% from March, and new home sales down 12%. But current homeowners are scurrying to refinance their mortgages and pull out cash before interest rates rise. (KY3.com)