Ohio Cash-Out Refinance Rules & Guidelines

The COVID-19 pandemic is bringing much economic uncertainty for many Ohioans, but there is a silver lining: low-interest rates. In March 2020, the Federal Reserve dropped interest rates to almost zero, snatched up $500 billion of Treasury securities and $200 billion of mortgage-backed securities.

These dramatic actions dropped mortgage rates. In some cases recently, it has been possible to snag a 2.5% rate on a 15-year mortgage, and 3.2% on a 30-year mortgage. That’s an incredible deal!

If you live in Ohio and have been considering a cash-out refinance, you might want to pull the trigger soon. Rates cannot get much lower and they won’t last forever.

For Ohioans who have equity in their homes, below is what you need to know about a cash-out refinance in this state.

Ohio Cash-Out Refinance Overview

Buying a home in Ohio may be the biggest investment of your life. If you have been paying your mortgage on time for a few years and have equity in the home, you may be ready for a cash-out refinance.

By refinancing the mortgage on your Ohio home, you may be able to lower your monthly mortgage payments by getting a lower interest rate. Also, you can pull out equity by taking out a larger home loan than the existing one. You can convert that equity into cash in your pocket.

A cash-out refinance is a popular idea for Ohioans who want to improve their homes but do not want to drain their savings account while doing it.

For example, remodeling your kitchen can cost $25,000 or more. If you qualify, you can refinance your mortgage at a lower rate and pull out cash to fund your home improvements. Done right, you might be able to increase the value of your home, too.

Let’s say you took out a first mortgage of $200,000 on your Columbus, Ohio, home and after 15 years, you have 100,000 left on the loan. If you want to pull out $50,000 of equity, you can refinance with a new loan of $150,000. The new loan includes the $100,000 balance and the $50,000 in cash you want.

By looking at your home’s current loan-to-value ratio (LTV), your lender will determine a maximum loan amount for your cash-out refi. The lender studies the market value of the property today compared to the balance owed on the current mortgage.

If the current value of the home is $250,000 and your lender has a maximum LTV of 80%, the maximum cash-out refinance amount is $100,000.

Rules & Guidelines on Ohio Cash-Out Refinance

Lenders in Ohio only allow you to do a cash-out refi for up to 80% of the home’s value. FHA used to allow 85% LTV, but the current limit is 80%. Also, you will need to have paid your loan on time for at least six to 12 months before you refinance.

Considerations With an Ohio Cash-Out Refinance

Doing a cash-out refinance in Ohio in the current climate can be a solid financial move because of the low-interest rates. Here are some considerations before you call your mortgage broker:

  • When you refinance your mortgage, you are restarting the mortgage clock. If you had a 30-year fixed mortgage and paid for 10 years, you are starting over with another 30-year mortgage. A smart move to avoid this is to get a 15-year mortgage if you can handle the higher payments.
  • Cash-out refinance rates are higher than rates for simple refinances. This is because the lender is taking on more risk when you pull out cash.
  • Your rate will depend on your credit score and debt-to-income ratios. You may not be able to qualify for the lowest rates.
  • Many financial experts recommend refinancing if you can save approximately 1% on your mortgage.

Final Thoughts on an Ohio Cash-Out Refinance Rules & Guidelines

A cash-out refinance on your Ohio home could be a great deal in the current financial environment. Ohio homes have been appreciating in recent years, and the low-interest rates in the COVID-19 pandemic mean you could save a bundle in interest by refinancing.

If you decide to refinance, make sure that you plan to stay in your home long enough to ‘break-even’ on the deal. Your new home loan will come with a few thousand dollars of closing costs. So you should stay in the home long enough so that the savings on your new rate is at least as much as you paid in closing costs.

Ohio Cash-Out Mortgage News

  • Shelter from the Storm: Mortgage Refinancing Rises in Coronavirus Crisis: Mortgage refinancing in Ohio is on the rise in 2020. Lower interest rates drive most refinances, but homeowners in Ohio may be looking to get cash out of their homes to get through the coronavirus crisis. But people who have been laid off are unlikely to qualify for a cash-out refinance. (Dispatch.com)
  • States That Are Missing Out on the Refinancing Boom: In 2020, refinance applications in Ohio are up 212%. More Ohioans should consider a cash-out refinance with low-interest rates; the median home value in Ohio is $152,000, and typical monthly savings on a refinance at current rates is $91.20. (Moneywise.com)
  • There Is a Silver Lining to the Coronavirus: It’s a Good Time To Refinance Your Mortgage: The impact of the coronavirus has generally been positive, providing some solace to Ohioans who have been affected by the pandemic. On some days since early March, mortgage rates have been at record lows for Ohioans, with a 2.5% rate available on some 15-year mortgages. (ABC6Onyourside.com)

References

Cash-Out Refinance Overview. Accessed at https://www.investopedia.com/terms/c/cashout_refinance.asp

Shelter from Storm – Mortgage Refinancing Rises in Coronavirus Crisis. Accessed at https://www.dispatch.com/business/20200403/shelter-from-storm-mortgage-refinancing-rises-in-coronavirus-crisis

There’s a Silver Lining to the Coronavirus – It’s a Good Time to Refinance Your Mortgage. Accessed at https://abc6onyourside.com/on-your-side/theres-a-silver-lining-to-the-coronavirus-its-a-good-time-to-refinance-your-mortgage

States Missing Out on the Mortgage Refinance Boom. Accessed at https://moneywise.com/a/states-missing-out-on-the-mortgage-refinance-boom

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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