Cash-Out Refi
Definition of "Cash-Out Refi"
Refinancing for an amount in excess of the balance on the old loan plus settlement costs. When the main objective of a refinancing is to raise cash, the relevant question is whether the cost of raising cash in this way is higher or lower than raising the same amount of cash with a second mortgage. A cash-out refi with an interest rate below the existing rate is likely to be less costly than a second mortgage. If the cash-out reh' rate is higher than the existing rate, the second mortgage is likely to be cheaper, even though the second mortgage rate may be well above the cash-out refi rate. The reason is that the second mortgage allows the borrower to retain the lower rate on the existing mortgage. Because the APR on a cash-out refi ignores the loss of the existing first mortgage, comparing it with the APR on a second mortgage is meaningless.
Popular Mortgage Terms
Adjustable rate mortgages on which the interest rate is mechanically determined based on the value of an interest rate index. Indexed ARMs are distinguished from Discretionary ARMs, in that ...
A documentation requirement where the applicant's income is not disclosed. ...
A mortgage Web site that shows mortgage prices posted by participating lenders, in some cases hundreds of them. ...
The frequency of rate adjustments on an ARM after the initial rate period is over. The rate adjustment period is sometimes but not always the same as the initial rate period. As an example, ...
A second mortgage on a property that is not paid off when the first mortgage is refinanced. The second mortgage lender must allow subordination of the second to the new first mortgage. ...
A mortgage on which half the monthly payment is paid twice a month. It should be called a 'semi-monthly mortgage' but market practice often trumps logic. In contrast to a biweekly, a ...
Mortgages delivered using the Internet as a major part of the communication process between the borrower and the lender. ...
A document that evidences a debt and a promise to repay. A mortgage loan transaction always includes a note evidencing the debt, and a mortgage evidencing the lien on the property. ...
Refinancing for an amount in excess of the balance on the old loan plus settlement costs. When the main objective of a refinancing is to raise cash, the relevant question is whether the ...
Have a question or comment?
We're here to help.