North Carolina Cash-Out Refinance Rules & Guidelines

Should you do a cash-out refinance in North Carolina? Well, interest rates are near all-time lows with the COVID-19 pandemic, and homes have been appreciating quickly in North Carolina. Zillow reports prices rose an impressive 5.1% in the last year, and the website terms the North Carolina market as ‘very hot.’

With rising home prices and low-interest rates, now might be the time to do your cash-out refinance in North Carolina. Below is vital information to know before you take the plunge.

North Carolina Cash-Out Refinance Overview

If you have a home in North Carolina, you know what a big investment it is. Most people want to regularly upgrade the home to make it more pleasant to live in and to increase its value. But what if you want to put in new kitchen countertops, cabinets, and flooring and don’t have the cash in your savings account?

Many North Carolinians are doing a cash-out refinance to get a lower interest rate and pull out some of their equity as cash in their pocket.

For example, say you want to transform that 1970s-era kitchen into a contemporary masterpiece. But you need $35,000 to do it. If you owe $150,000 on your home loan and have a $300,000 mortgage, you can refinance for $185,000. Take that $35,000 in cash and create your dream kitchen.

Rules & Guidelines on North Carolina Cash-Out Refinance

Of course, you have to qualify for your new, higher mortgage. Your credit score and debt-to-income ratio (DTI) need to be acceptable to your lender to be approved. You need at least a 620 credit score to qualify for a cash-out refinance from most North Carolina lenders. But for the best rates, aim for a 700 FICO score and a DTI well under 50%.

Also, you need a minimum of 20% equity in North Carolina to qualify for a refinance. But you cannot borrow more than 80% of the home’s value in this state, so there are strict limits on how much you can take out.

Considerations With a North Carolina Cash-Out Refinance

Before you decide on a cash-out refinance for your North Carolina home, consider the following points:

  • You have to pay closing costs. Everything comes with a price, right? Taking out a new mortgage is no exception. You have to pay for appraisal fees, credit report fees, and attorney fees. The average closing costs in the state are $2,367. You should make certain you are going to stay in your home long enough to ‘break-even’ on the refinance, meaning your monthly savings should be more than what you paid in closing costs.
  • Your interest rate will vary: True, rates during the COVID-19 have been low, but a lot depends on your credit score and debt-to-income ratio. Try to have all on-time payments on your credit report for a year, and pay off as much debt as you can to increase your score.
  • You have to pay for a new appraisal: Any time you do a cash-out refinance, you need a new appraisal so the lender knows what your house is worth. You can expect to pay an average of $325 for a North Carolina appraisal.
  • You are taking on more debt, so you are putting your house on the line if you cannot pay the new mortgage. But if you are using the equity to improve your home, you can come out on the plus side by increasing your property value.
  • On the plus side, a kitchen remodel is one of the most popular upgrades you can do in your home. When it comes time to sell, it will make your North Carolina home more marketable. If you spend $35,000 on a kitchen upgrade, you can expect to add about $20,000 in value to your home. Other upgrades that add plenty of value are a bathroom upgrade, new wood flooring, add a new bathroom and HVAC replacement.

Final Thoughts on North Carolina Cash-Out Refinance Rules & Guidelines

With home prices rising in North Carolina and interest rates falling, you could be in a great position to do a cash-out refinance today. If your credit is good and you plan to live in your home awhile, you may get a lower rate and pull out the cash you want for those home improvements you have wanted to do for years.

North Carolina Cash-Out Mortgage News

  • These Cities Are Seeing the Highest Growth in Mortgage Refinance Applications: Applications to refinance mortgages have tripled from a year ago in the 50 largest US cities, and Raliegh, North Carolina is one of the cities seeing the most growth in refi applications, with a 406% increase from a year ago. (Forbes.com)
  • Lending Tree Has Reported a 308% Year-Over-Year Increase in Mortgage Refinancing Applications in North Carolina: Many North Carolinians are jumping at the chance to refinance their mortgages, with Raliegh ranked second in the nation in applications and Charlotte seventh. (Journalnow.com)
  • The Average Mortgage Payment Is Declining – Here’s Why: Generally, mortgage payments are declining, and in North Carolina, the average payment is $1,437. Lower interest rates are spurring more cash-out refinances, so it is expected average mortgage payments will continue to drop in the US and in North Carolina specifically. (TheMortgageReports.com)

References

Home Values in North Carolina. Accessed at https://www.zillow.com/nc/home-values/

North Carolina Appraisal Costs. Accessed at https://appraisers.promatcher.com/cost/north-carolina.aspx

These Cities Are Seeing the Highest Growth in Refinance Applications. Accessed at https://www.forbes.com/sites/brendarichardson/2020/03/25/these-cities-are-seeing-the-highest-growth-in-refinance-applications/#737bf4bf3d6e

Trying to Close the Door on Coronavirus – Home Sellers Delay Open Houses. Accessed at https://www.journalnow.com/business/trying-to-close-the-door-on-coronavirus-home-sellers-delay-open-houses-because-of-pandemic/article_7b9e8b74-d6ec-598a-ac9d-223ab4327f27.html

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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