I'd like to know... The purpose of refinancing is getting another loan.. reduce your interest... But why do they give you money? (cash out?) Can someone plz explain to me?
2006-06-21 07:33:43 · 9 answers · asked by unlargocaminoalcielo 2 in Business & Finance ➔ Renting & Real Estate
I know what the money is for... But I wanna know WHY they give you money
2006-06-21 07:39:48 · update #1
Where does that particular money come from?
2006-06-21 07:40:22 · update #2
Suppose they give you 20thousand. It'd go to the total loan?
2006-06-21 07:45:12 · update #3
What is equity then?
2006-06-21 08:18:05 · update #4
It may be your intention to reduce your cost but the company who is processing your loan is in the business of making money.
They will attempt to 'extend your credit' as much as your qualifying stats will allow (in some cases more). BUT, you do not have to accept this extra money if you do not want to. If you are asking for $50,000 and they offer you $65,000, this means that they will give you what you are asking. The point is, the more money you borrow, the more money they make on interest payments.
Hope this helps.
2006-06-21 07:44:24 · answer #1 · answered by -:¦:-SKY-:¦:- 7 · 0⤊ 0⤋
There are many possible purposes to refinancing. Rate and Term Refinance, is just what it sounds like. when you are say in a 40year fixed and want to go to a 15 year fixed. Or if your at 10% interest, your credit has come up, and you want to get a lower interest rate. Or BOTH.
The other is a Cash-Out Refinance. The money can be used for pretty much anything you want, debt-consolidation, home improvements, vacations, medical needs, schooling for children are some of the more common ones I help people with.
The cash-out money comes from the equity in your home theoretically, and is added to the total balance of your loan. The money comes from the bank, they get the money from interest they charge on their other accounts of various types.
2006-06-21 07:54:45 · answer #2 · answered by ReggieWjr1 4 · 0⤊ 0⤋
It is an increase in your loan amount. The money becomes part of the loan/mortgage for your house.
Let's say you buy a house for $150k; 2 yrs later the market increases and the same house would sell for $200k - that additional $50k is EQUITY.
You decide you want $20k for whatever (pay off debt, improvements, vaca, etc) so you ReFinance your mortgage. You now borrow $170k using your house as collateral, $150k-ish of that amount is paid to your old Mortgage Co to pay off the 1st loan and the remaining money after fees, etc is Cash Out that you get (a/b $20k in this case)
2006-06-21 08:16:19 · answer #3 · answered by tressa1220 3 · 0⤊ 0⤋
They are giving you the maximum amount that they can loan you based on the appraised value of your house. Due to appreciation in value, you may qualify for enough money to pay the other mortgage off and still put money in your pocket. But you are now paying interest on the additional money that you borrowed. You could have borrowed less or immediately made a principal payment for the amount that you got in excess of what was required to pay off the old mortgage. If you have a house worth 100k and have borrowed 80k then you have 20k in equity.
2006-06-22 16:35:42 · answer #4 · answered by spirus40 4 · 0⤊ 0⤋
In refinance, cash-out is dependent on the difference of the "appraised value" versus the original value or amount of the original loan when taken out. It is at the discretion of the Borrower as to how much of that should be used as cash, subject any credit challenges such as high card debt ratios or liens that may need to be paid. Lenders may suggest that some debt be paid down at funding, such as a credit card expense of $4800 on a $5000 Credit Line. That's to ensure that your DTI or debt-to-income ratio will be better after refinancing. DTI should be 55% or less pending lender, FICO scores and/or loan program
2006-06-21 08:05:59 · answer #5 · answered by Anonymous · 0⤊ 0⤋
They give money when you refinance your mortgage for more than you owe and then you pocket the difference in the form of cash. You do need home equity for it to work and a solid local real estate market.
2006-06-21 07:42:57 · answer #6 · answered by sunny 2 · 0⤊ 0⤋
there are 2 types of refinances 1 is cashout and if you did not ask for cash out then your lender did it just to raise the loan amount and make more money. the other is rate and term refi and you would not get any money back.
2006-06-21 07:43:04 · answer #7 · answered by Anonymous · 0⤊ 0⤋
to payoff your debt if any, if you want to remodel your house, buy a new car, furnish your house with new stuff. lots of things, but if you just want rate and term where you don't get cash at all. it comes trough your loan. if a perdiem is estimated incorectly then they adjust it to be correct and return the money to you.
ask your loan officer
2006-06-21 07:38:52 · answer #8 · answered by rqerita 4 · 0⤊ 0⤋
that is not "known" or rational to spend your life paying a private loan. effective, credit distributors might want to like you to imagine that is. credit distributors and coverage organizations pick to get a reduce of each and every thing you spend. the quantity of funds they take in for doing no longer something of genuine value is awesome. the truly rational element to do with "discounts" is to pay off your debts and then perchance you could have adequate money an indulgence or 2 yet customarily you pick to save on your retirement. "discounts" is not in any respect genuine funds. that is purely the diverse between what you pay and some mythological "record value" that no sensible individual really will pay. once you "save funds" that is not accessible for something else because it not in any respect existed contained in the first position.
2016-10-20 11:23:08 · answer #9 · answered by Anonymous · 0⤊ 0⤋