Home prices in Nevada average $309,000, with a 2.3% increase over last year, according to Zillow.com. Homeowners in the state may be eying the low-interest rates we have been seeing since the COVID-19 pandemic hit the country.
At some points, the rate for a 30-year, fixed-rate mortgage was 3.3%. It is rare to see interest rates that low, so now could be the ideal time to do a cash-out refinance. If you have been dreaming about remodeling your kitchen or adding a bedroom, you could take some equity out of your home and pay a very low-interest rate.
Below is more information about a cash-out refinance in Nevada.
Nevada Cash-Out Refinance Overview
If you buy a home around Las Vegas, you will pay well over $300,000 in most cases. It’s a big investment. That’s why homeowners like to maintain their property and upgrade it when they can afford it. But home renovations cost $20,000 or $30,000. Paying that much in cash is tough!
With the coronavirus pandemic, you might have a special opportunity to access the cash to add that bedroom or upgrade the kitchen. Interest rates are so low, refinancing for cash-out makes sense.
With a cash-out refinance, you are paying off your old mortgage with a new one for one with a higher balance. You are taking out some of your equity for home improvements so your mortgage will be bigger than it was, but it should have a lower interest rate.
Let’s say you have a $300,000 mortgage and you owe $150,000 on it. You have at least $150,000 in equity. If you wanted to take out $50,000 in cash to add a bedroom, you could refinance your home for $200,000. Plus, if you refinance from 4.5% to 3.5%, you could save more than $100 per month on your mortgage payment.
Rules & Guidelines on Nevada Cash-Out Refinance
Since the COVID-19 pandemic, getting a mortgage has become more challenging for some borrowers, including cash-out refinances. Lenders are looking more carefully at income and some banks are verifying your employment up to the day of closing.
Also, credit standards are tighter; a 680 credit score is probably needed for a cash-out refinance for lenders backed by Fannie Mae and Freddie Mac. A debt-to-income ratio of 36% is usually required, meaning your total monthly debt payments cannot exceed 36% of your gross monthly income. However, if you have an FHA loan, you may be able to have a ratio of 43%.
You need to have at least 20% equity in your Nevada home to qualify for any cash-out refinance. Further, you cannot have an LTV higher than 80%; at least 20% of your equity must stay in the home.
Considerations with a Nevada Cash-Out Refinance
There is no doubt that the COVID-19 pandemic has produced a good opportunity for some homeowners to lower their interest rate and pull out cash. But it is recommended to consider these following items before sending in your application:
- Closing costs in Nevada average a hefty $5,329. The best option is to pay those closing costs in cash. But many people roll that cost into their new loan. Either way, know that it is best to stay in your home for several years after you refinance or it may not be financially worthwhile. Assuming you save $100 per month on your mortgage payment, you would need to stay in the house for 50 months to break even.
- What is your current interest rate? Many mortgage experts say you should refinance if you can save .75% to 1% on your rate. If you cannot save that much, you may want to leave your mortgage alone and consider a home equity loan instead.
- Taking on a higher mortgage has risks. You owe more money to the bank and if you cannot keep up on your payments, you could lose your home.
- Thinking about refinancing into another 30-year mortgage? You will be starting over on your payments. Instead, see if you can refinance into a 15-year or 20-year mortgage. You’ll pay your loan off faster and save a lot on interest payments.
Final Thoughts on Nevada Cash-Out Refinance Rules & Guidelines
Home prices in Nevada have been on the rise, but it is uncertain what effect the COVID-19 pandemic will have on home values. If you have been on the fence about refinancing, you may want to do it sooner than later. These interest rates may not last, and home prices could fall in the coming months.
Nevada Cash-Out Mortgage News
- Southern Nevada Home Prices Hit New Record: Current home prices in southern Nevada hit a new peak in March 2020, despite the coronavirus pandemic. The price of existing homes that month was $319,000. Many homeowners are taking advantage of low rates to refinance before volatility in the housing market leads to a drop in prices. (KXNT.Radio.com)
- What to Expect in the Las Vegas Housing Market: It is expected that home prices in the short term will fall as the economic shock hits the Las Vegas economy, but housing prices will correct over the next one to two years. It could be best to refinance your home now before prices decline. (UNLV.edu)
- Reno-Sparks Median Price Hits $415,000 in March, But How Long Will It Last? Home prices in the Reno area have hit record highs, but there are concerns about how long it will last. If you want to refinance your mortgage, now could be the time with low rates and high prices. (Nevadaappeal.com)