Cash-out refinance is a type of mortgage refinancing in which the borrower replaces an existing mortgage loan with a new loan for a higher amount than the current loan balance. The borrower receives the difference between the new loan amount and the remaining balance in cash.
The cash-out refinance allows homeowners to tap into the equity they have built up in their property over time. Equity is the difference between the market value of the property and the outstanding mortgage balance. By refinancing and taking out additional funds, borrowers can convert some of this equity into cash.
The cash that your client receives from a cash-out refinance can be used for various purposes. Those include home improvements, debt consolidation, educational expenses, or other financial needs. It’s important to note that the new loan amount will typically include the remaining balance of the existing mortgage, closing costs, and any additional funds.
Keep in mind that cash-out refinancing increases the total amount owed on the property. It may result in a higher monthly mortgage payment or a longer loan term. It’s essential to carefully consider the financial implications and consult with a mortgage professional to determine if a cash-out refinance is the right option for your specific situation.
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