The Federal Reserve just announced another Rate Hike, and the Prime Interest Rate is now 8.25%. As of 2023, the Raleigh NC Market is still considered one of the fastest-growing real estate markets in the Country. According to Trulia, if you purchased a home in Cary, NC, for $276,000 five years ago, that same house would likely be worth $420,000 today. This means that homeowners have built up a significant amount of equity in just 60 months. Even with rising mortgage rates, many people are considering refinancing to pull some money out of their homes. There are many cash-out refinance options available in North Carolina that homeowners can explore.
A cash-out refinance mortgage is different from a home equity line of credit (HELOC) because it pays off the original first mortgage and replaces it with a larger first mortgage, allowing homeowners to take out the cash as they please. On the other hand, HELOCs are second mortgages added on top of the original mortgage, and the terms of the original mortgage remain the same. Most HELOC’s are Adjustable Rate Mortgages, so as the Fed is raising rates, the payment on that HELOC is going up too! (Yikes!)
The Tax Code changed at the end of 2017, which means that home equity loans no longer have tax deductions available. For purchase transactions, the mortgage interest deduction will likely remain in place. However, second mortgage deductions were removed with the bill. Refinancing two loans into one mortgage can help homeowners keep their mortgage interest deduction and avoid the adjustable rate associated with the second mortgage.
👀💳💰 Paying high credit card interest? Refinancing could save you thousands per month – even if you have a low mortgage rate now!
With the appreciation rates of more than 4% in most areas, maybe you could avoid PMI? There are multiple reasons why it makes sense to refinance once homeowners have the equity to do so. For instance, if you have a USDA Home Loan NC or a FHA Loan, mortgage insurance stays in place for the life of the loan. Refinancing from a FHA Loan to a Conventional Loan, where the private mortgage insurance (PMI) falls off once homeowners have a 20% equity gap, might make sense right now.
Cash-out refinance options are available for conventional, FHA, USDA, and VA loans. However, if the original VA mortgage was not originated by Equity Resources, an appraisal is required. For Veterans, this loan could be the best way to put home equity to work to complete your family financial goals. Rates are at “Traditinal” lows, and approval is easier than for standard cash-out programs.
Additionally, if you have a 13th payment each year on a 30 year mortgage in NC, you will literally pay the mortgage off in 17.5 years! You can have the flexibility of a low 30 year payment, but you can be conservative and pay the mortgage off early!
Credit Card Debt today is carrying an average rate of 21%, we recently saw a credit card statement with an interest rate of 31%. If you are trading debt at 31% interest rate on credit card debt, and prime plus 2% for a HELOC (so 10% interest on an adjustable 2nd mortgage) for a new cash out refinance mortgage (that you can write off on taxes) at a much much lower interest rate … it probably makes sense. We really have seen an uptick in cashout refinances in the last 30 days.
If you are paying off credit cards, or a car, or student loan debt – we will need payoff information of exactly how much you owe. We realize this can be a little bit of a pain, especially if you dont have online access to your credit card accounts. If that’s the case, please be sure to keep your credit card statements, as this is something an Attorney generally can not verify for us. We recently had an Eastern NC Veteran who recently wanted to pay off $21k on a Cessna airplane he owned iwth a buddy. He wanted to buy the other guy out. We can do that.
Cash-Out Refunance and Divorce
A cash-out refinance might be the best bet for homeowners going through a divorce… particularly if the person who intends to keep the mortgage has a middle credit score of at least 640, and they have the income to support the mortgage on just their income.
Freddie Mac added a new guideline that addresses special purpose cash-out refinance mortgages for taking a spouse off the mortgage. The program’s guidelines require a full appraisal of the property and that the borrower and co-owner must have jointly owned and occupied the property as their primary residence for at least 12 months before applying for the loan.
The borrower retaining sole ownership of the property cannot receive any proceeds from the cash-out refinance transaction, and both the borrower and the co-owner receiving the buyout proceeds must provide a written agreement, signed by all parties, stating the terms of the property transfer and the disposition of the funds.
Lastly, it is advisable to get an educated, professional opinion of your home’s value rather than relying solely on Zillow’s estimates. An appraisal may cost around $350, depending on the size of the property. Alternatively, homeowners can get an opinion of value from a real estate agent, but an appraisal is probably the best option.
If you are looking at your cashflow, and want to see if a Cash-Out Refinance is right for your family, you should call us! Steve and Eleanor Thorne 919 649 5058. We work with folks all across NC, and we can talk with you about Cash-out Refinance Options to pay for College, redecorate your home, do improvements… or you could use it to finish that divorce.
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