Posted on: 01st Apr, 2004 03:14 am
Cash out Refinancing is the process of taking a new mortgage loan greater than the unpaid balance of the existing mortgage, keeping the same property as security for the debt. Through this process a borrower can pay off the existing loan as well as utilize the extra cash for other purposes.
For example, suppose Kris took a mortgage loan of $1, 20,000 to purchase a house. He still owes $70,000. He also wants $25,000 as cash. So he takes a new mortgage loan of $95,000 with the same property as the collateral. This is known as cash out refinancing.
Features:
Related Forum Discussion
For example, suppose Kris took a mortgage loan of $1, 20,000 to purchase a house. He still owes $70,000. He also wants $25,000 as cash. So he takes a new mortgage loan of $95,000 with the same property as the collateral. This is known as cash out refinancing.
Features:
- One should choose cash out refinance mortgage only when the current market rate is lower than the interest rate on the existing mortgage.
- The loan amount in cash out refinancing exceeds the amount of existing mortgage that is left to be paid.
- A borrower has to pay for the closing costs associated with cash out refinance loan.
- The interest on cash out refinance loan is tax-deductible, so it prevents a borrower from paying extra taxes.
- Cash out refinancing helps to generate cash from home equity and then use the extra cash for home repairs and paying off other debts.
- One can also shift from an adjustable rate mortgage to a fixed rate mortgage and vice-versa but this depends on how much a borrower can save due to prevailing market rates.
Related Forum Discussion
Are the LTV/Indicator Score Fee and the Cash Out Refinancing Fee, two fees that have to be charged to the borrower or are these fees just a new way for banks to make money? These fees will add a combined 1.875% of loan amount to the closing cost on people with A Credit.
andre, i have never heard of "ltv/indicator score fee" nor "cash out refinancing fee."
what kind of lender are you dealing with?
what kind of lender are you dealing with?
I really hope he answers you George....this will be interesting.
