The borrower finds a lender willing to work with them
How Does a Cash-Out Refinance Work?
Here’s how a cash-out refinance works. The lender assesses the previous loan terms, the balance needed to pay off the previous loan, and the borrower’s credit profile. The lender makes an offer based on an underwriting analysis. The borrower gets a new loan that pays off their previous one and locks them into a new monthly installment plan for the future.
With a standard refinance, the borrower would never see any cash in hand, just a decrease to their monthly payments. A cash-out refinance can possibly go as high as approximately 125% of loan to value. This means that the refinance pays off what they owe and then the borrower may be eligible for up to 125% of their home’s value. The amount above and beyond the mortgage payoff is issued in cash just like a personal loan.
Individuals with specialty mortgages like U.S. Department of Veterans Affairs (VA) loans or Federal Housing Administration (FHA) loans qualify for specialty refinance options. (tovább…)
