Cash-Out Refinance in North Carolina: What You Need to Know

Cash-out refinance in North Carolina lets you take money out of your home’s value by replacing your current mortgage with a new home loan. 

With cash-out refinancing, you get the cash difference between the mortgage loans as a lump sum that you can spend on anything you consider worthwhile. 

If you live in North Carolina, a cash-out refinance could be the solution you’ve been searching for. 

Let’s look at what cash-out refinancing is, how it works in North Carolina, and whether it might be right for your financial situation.

How cash-out refinancing works

Cash-out refinance allows homeowners to take out a larger home loan and get cash for the equity they’ve built in their homes. 

While there are no limits or restrictions on what you can do with the cash you receive from a cash-out refinance in North Carolina, there are several common reasons homeowners apply for refinancing, including:

• Consolidating multiple debt payments into a single, lower monthly payment
• Home renovations or improvements
• Education 
• Starting a business
• Unexpected medical expenses
• Weddings
• Vacations
• Purchasing an investment property

One of the great things about a cash-out refinance loan is that you don’t have a second mortgage with an additional monthly payment you need to cover. 

Instead, you replace your current mortgage with a new one. Homeowners are often eligible for better interest rates or mortgage terms that can lower their monthly mortgage payments when they refinance.

Cash-out refinance rates in North Carolina

Another popular benefit of cash-out refinance vs. no cash-out refinance loans in North Carolina is that you don’t pay higher interest rates. 

The interest rate you receive for any loan, whether a mortgage, car loan, or personal loan, is based on several factors. 

Your employment situation, income, amount of debt you carry, and credit score all contribute to the interest rate you can receive. But your credit score has the biggest influence on your interest rate. 

That’s why checking your credit score before applying for any loan is always a good idea.

Cash-out refinance loan interest rates are also typically lower than interest rates on other loans or credit cards. 

Qualifying for a cash-out refinance in North Carolina

For most mortgage lenders, you’ll have to have good credit. FICO defines “good” credit as scores between 670 and 739. 

You’ll also need a DTI (debt-to-income) ratio of less than 43%. Your DTI is the percentage of your monthly income you spend to pay debts, like credit cards or student loans.

Most cash-out refinance lenders allow you to borrow up to 80% of your home’s assessed value. Some loans, such as VA loans (mortgages backed by the Department of Veteran Affairs), allow homeowners to borrow up to 100%.

To figure out how much equity you have built up, subtract how much you still owe on your mortgage from your home’s value. 

Let’s look at a cash-out refinance example

If your home’s assessed value is $300,000 and you still owe $100,000, borrowing 80% of the equity in your home would mean you get a lump sum cash payment of $140,000 that you can use however you choose. 

It’s important to remember that just like your first mortgage, a cash-out-refinance loan uses your home as collateral. If you fail to make your mortgage payment, your lender could start foreclosure proceedings on your home.

Don’t forget closing costs 

When you’re considering your budget, remember to include closing costs. Cash-out refinance loans in North Carolina have closing costs like other mortgages. 

Closing costs typically range between 2%-5% of the total mortgage amount. Some mortgage products allow closing costs to be rolled into the total mortgage amount, while others require a cash payment at closing.

Check with your lender to see what options are available. 

Cash-out refinance vs. HELOC

While cash-out refinance and a home equity line of credit (HELOC) allow homeowners to tap into a home’s equity, they offer different advantages. 

The main disadvantage to a HELOC is that unlike cash-out refinance, borrowers who get a home equity line of credit have to make their regular mortgage payment AND the additional monthly line of credit payment. 

The main advantage of a HELOC is that it’s revolving credit and works a lot like a credit card—when you repay what you’ve spent, you can use the credit again, up to the credit limit. 

North Carolina is booming

North Carolina was the fourth-fastest growing state in 2021, and last year, its population increased by almost 65,000 new residents, moving it up to the number three spot. 

And if you live in the Tar Heel state, you know why everyone’s heading your way. 

From its eastern coastal plains to the Appalachian Mountains in the west, North Carolina boasts breathtaking trails, lakes, streams, and roaring whitewater rivers in its more than 50 state and national parks—and four national forests. 

For those who aren’t outdoorsy, the state’s robust business and technology core are a continuous draw.

Why North Carolina is a prime area for a cash-out refinance

All those newcomers to the state are driving up property values for North Carolina homeowners. 

The average price in North Carolina for a single-family home is currently $328,682, a 21.6% increase over last year. 

As a homeowner in North Carolina, your home could be worth more than you thought.

The equity in your home increases either by making your monthly mortgage payments or when your home’s value increases. 

In other words, if your home was worth $300,000 last year, it could be worth up to 21.6%—or $64,800— more, and you can access that extra home equity with a cash-out refinance home loan.

How to apply for cash-out refinance in North Carolina

If you’re ready to apply for a cash-out refinance, you can start your application with AAA Banking today. 

Whether you’re buying your first home or have questions about refinancing your current mortgage, we can help. The honest, trustworthy loan officers at AAA Banking can help you find the financial solution that works best for you. 

At AAA Banking, our commitment doesn’t end at closing—we’re with you every step of your mortgage journey.

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