Definition of "Cash-Out Refi"

Simon Westfall Kwong real estate agent

Written by

Simon Westfall Kwongelite badge icon

Keller Williams Realty

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.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Mortgage Terms

A condominium project with features that lenders view as favorable in terms of their risk exposure on loans secured by individual condo units. The requirements of warrantability include ...

A borrower who doesn't pay. ...

A lender commitment to make a mortgage loan to a specified borrower, prior to the identification of the property that will be mortgaged. On a pre-approval, unlike a pre-qualification, the ...

A transaction in which interest is not paid on interest there is no compounding. For example, if you deposit $1,000 in an account that pays 5% a year simple interest, you would receive ...

A documentation requirement where the applicant's assets are not disclosed. ...

The dollar amount of interest paid each month. The interest payment is the same as interest due so long as the scheduled mortgage payment is equal to or greater than the interest due. ...

The assumption of a mortgage, with permission of the lender, from a borrower unable to continue making the payments. ...

A sale price below market value, where the difference is a gift from the sellers to the buyers. Such gifts are usually between family members. Lenders will usually allow the gift to count ...

The minimum allowable ratio of down payment to sale price on any loan program. If the minimum is 10%, for example, it means that you must make a down payment of at least $10,000 on a ...

Popular Mortgage Questions