According to Zillow.com, home prices in Montana average $288,800, with home prices up 5.2% from one year ago. Homeowners in Montana may be looking closely at the low-interest rates during the COVID-19 pandemic and thinking it could be time to refinance.
They could be right. In the last two months, 30-year mortgage rates have fallen into the low to mid 3’s. It is seldom we see interest rates so low, so if you want to save on your mortgage and pull out equity, consider applying for a Montana cash-out refinance today.
Montana Cash-Out Refinance Overview
If you purchase a home in Montana, you will often pay between $200,000 and $300,000. It’s a huge investment for most people. That is why most Montanans want to maintain their home and upgrade it as they can afford to do so. But if you want to do a big kitchen remodel, you could be looking at a $30,000 bill. How will you pay for it?
Credit cards and personal loans have high-interest rates. Another option is to access the equity in your home with a cash-out refinance. A cash-out refinance involves paying off your first mortgage with a new mortgage with a higher balance. You refinance the home for what you owe, plus the amount of equity you are pulling out. Your mortgage balance is larger, but you probably have a lower interest rate.
For example, if you have a $300,000 home loan and owe $150,000, you should have $150,000 in equity. Say you want to pull out $30,000 in cash to remodel your kitchen. You can refinance the home for $180,000 and take $30,000 in cash. Also, if you can reduce your interest rate by a point, you might save $100 or $200 on your payment, depending on your exact mortgage amount.
Rules & Guidelines on Montana Cash-Out Refinance
Since the coronavirus hit the US in March 2020, getting a home loan has gotten more difficult. Getting a cash-out refinance can be even more challenging, so you will need to make sure you have the credit score and income to satisfy your lender.
Credit standards are higher now. You will need at least a 680 FICO score for a cash-out refi for Fannie Mae and Freddie Mac-backed loans. You also could need a 36% debt to income ratio (DTI). This means your monthly debt payments cannot be more than 36% of your gross income.
Also, you must have at least 20% equity in your Montana to qualify for a cash-out refinance. LTVs above 80% are not allowed, and some lenders may only allow 70% or 75% in the current economic environment.
Considerations with a Montana Cash-Out Refinance
The coronavirus pandemic is a tough time for the world, but it has created an opportunity for some Montana homeowners to pull out cash and get a lower interest rate. But it is a good idea to consider all sides of the refinance before you submit an application:
- Closing costs average $2700 in Montana. These costs should be considered as you weigh whether or not to do a cash-out refinance. You can pay these at closing which is the best idea financially but also can roll them into your loan. Consider how long you intend to live in the home; if you move a year after you refinance, you will not recoup your closing costs in your interest savings. Refinances are best for people who plan to live in the home at least a few years.
- Consider what your current rate is. Many experts recommend that you save at least .5% on your rate before you refinance. If you have a low mortgage rate now, you might want to get a home equity loan or home equity line of credit (HELOC).
- Taking on a bigger home loan has some risks. Can you afford the higher payment? Don’t take on a bigger payment unless you are sure you can handle it or you could lose your home.
- Do you want to refinance into another 30-year loan? This starts your payment plan all over. If you have been paying your loan for 20 years, consider refinancing into a shorter-term loan so you can pay your loan off faster.
Final Thoughts on Montana Cash-Out Refinance Rules & Guidelines
Home prices are rising in Montana and interest rates are low, so this could be the best time to refinance with cash out in years. Interest rates will not stay this low for long, so consider making the move today on your cash-out refinance.
Montana Cash-Out Mortgage News
- Housing Market in Montana Sees Steady Prices and Strong Sales: In Flathead Valley, Montana, real estate has been strong with high demand and low-interest rates. People who have been refinancing their mortgages also have been saving a lot in interest. (Flatheadbeacon.com)
- Home Prices Hot in Montana Despite the COVID-19 Pandemic: Home values are up a hot 20% from a year ago in Montana. If you have been thinking about doing a cash-out refinance, this could be the best time in years. (Moneywise.com)
- Montana Interest Rates at All-Time Low of 3.23%: As of April 30, 2020, mortgage rates reported in Montana were at an all-time low of 3.23%. If homeowners can qualify under tighter lending criteria, this could be a good time to do a cash-out refinance or buy a home. (NBCMontana.com)