Mortgage interest rates are low, with some experts expecting rates for 30-year loans to fall below 3%. With property values increasing in Oklahoma at a 3.83% rate, this could be the perfect time to refinance your mortgage and pull out equity to perform some remodeling on your home.
Below is more information about cash-out refinances in Oklahoma to consider, but it is a good idea to act quickly because no one knows how long these low rates will last.
Oklahoma Cash-Out Refinance Overview
If you own your own home in Oklahoma, you probably have made the biggest financial investment of your life. Spending $150,000 or $200,000 on a home is a lot of money, and it makes sense to keep the house in good repair and renovate it when you can. But if you want to do a serious remodel, such as the kitchen, you could spend $30,000.
Instead of paying cash or using high-interest credit cards, you may consider a cash-out refinance loan on your Oklahoma home. Interest rates are in the 3.5% range these days, so it is possible to save a lot on your monthly payment if you have a higher rate. At the same time, you can take out thousands of dollars of your equity and improve your home, which adds to its value.
For example, if you are tired of those old Formica countertops and vinyl flooring, you could add gorgeous gray granite countertops, tile flooring, new cabinets, and modern appliances for $20,000 or $30,000.
If you have a $150,000 mortgage and owe $50,000 on it, you might refinance the mortgage for $75,000 and take the $25,000 in cash at closing. If your previous interest rate was over 4%, you could save $75, $100, or even more on your payment, too.
Rules & Guidelines on Oklahoma Cash-Out Refinance
If you want to apply for a new mortgage with cash out, you need to qualify it based on your income, credit score, work history, and debt-to-income ratio (DTI). Expect to need a credit score of 640 at least, with 700+ for the best interest rates.
Regarding DTI, if your loan is backed by Fannie Mae or Freddie Mac, you probably need a back-end DTI of no more than 36%. This means all of your monthly debt payments compared to your gross monthly income is no more than 36%. If you are getting an FHA loan, they are more lenient on DTIs; you could qualify with a 43% back-end ratio.
Regulations also require you to have at least 20% equity in your home to qualify. Also, most lenders will not let you borrow more than 80% of your home’s value. This protects you from overextending yourself if home prices crash, so you do not owe more than the home is worth.
Considerations with an Oklahoma Cash-Out Refinance
With rising property values in Oklahoma and low-interest rates, a cash-out refinance is tempting! Before you pull the trigger, think about the following points:
- You need to pay closing costs on your new loan, which average $3,001 in Oklahoma. The best thing to do is pay your closing costs out of pocket at the closing table. However, many borrowers wrap the closing costs into the loan; be aware this means you are paying interest on your closing costs for the life of the loan. It also is important to think about how long you are going to live in the home. Say you save $100 in your monthly mortgage payment with your new interest rate. You have to stay in your home for about 30 months to break even.
- Are you expecting to write off the interest on the equity you are pulling out? The IRS requires you to use the money to make improvements on your home. If you use the money for another purpose, you cannot write off the interest.
- Think about what your current interest rate is. If you are paying 4% or more, it may make sense to refinance at 3.5% or 3.3%. If your rate is lower than 4%, you could consider doing a home equity loan instead. You can still tap your equity but leave your first mortgage and low-interest rate in place. Your lender can talk to you and help you decide what is best in your situation.
- If you refinance into a 30-year loan, your repayment schedule starts over. This probably isn’t a good idea if you have been paying on the loan for a long time. Think about refinancing into a 15-year loan so you save interest and pay your loan off faster.
Final Thoughts on Oklahoma Cash-Out Refinance Rules & Guidelines
Interest rates are low in the United States as of April 2020 as the COVID-19 pandemic has caused much economic upheaval. This troubling turn of events does offer a silver lining to Oklahomans who want to refinance their mortgages and pull out cash. Talk to your lender today about a cash-out refinance so you can save every month and get the cash you need to beautify your home.
Oklahoma Cash-Out Mortgage News
- Real Estate, Housing Industry Adjusting to Coronavirus, Stay-At-Home Orders: The spread of the coronavirus across Oklahoma and stay-at-home orders have affected the housing and real estate industry. There are now fewer homes for sale and no open houses occurring. But interest rates are low, so current Oklahoma homeowners are taking advantage by doing cash-out refinances on their mortgages. (Normantranscript.com)
- US Long-Term Mortgage Rates Down to 3.33% in Early April: While the COVID-19 pandemic has caused economic chaos and uncertainty in the housing market, many homeowners in Oklahoma are seeing record-low interest rates and are running to refinance their mortgages before it’s too late. (WSET.com)
- Home Values Rose 3.83% Last Year In Oklahoma: Home prices have been rising at a steady clip in Oklahoma, and with today’s low-interest rates, there could not be a better time to refinance your mortgage and save a bundle. (Moneywise.com)