2007-07-02 08:09:55 · 7 answers · asked by terica9 1 in Business & Finance ➔ Renting & Real Estate
If your loan size is increasing with the refinance, then you will have less equity in your home as your loan-to-value ratio would be higher.
For instance, say you have a $200,000 loan now, and your home is worth $250,000. Currently you have $50,000 in equity. If you refinance your home, get some cash out, and roll in the closing costs associated with the refinance loan, your new loan size is going to be $245,000. The equity you own in your home is now $5,000.
If the loan size remains the same, you'll have the same amount of equity.
Bear in mind, most banks will require that an appraisal be done to indicate the homes current value. If the appraisal comes in lower than it did when you purchased (which is very possible in today's market with some many homes sitting and not being sold) you're not actually losing equity just because you refinanced. You're just then finding out that your house is now worth less than it was before.
Value - Loan Size = Equity
2007-07-02 08:14:53 · answer #1 · answered by Ari 3 · 1⤊ 0⤋
It is confusing sometimes, buy the equity is simply the difference in the market value of your house and how much you owe on it.
So if you buy your home for 200,000 and you put 40,000 down you have a loan for 160,000 and since the purchase probably reflects the market value you have $40,000 equity.
A few years later if the market value of your home is 300,000 and you owe 150,000 then your equity is 150,000.
If you refinance and put a loan for a total of 200,000 and your value is still 300,000 then you have an equity of 100,000.
Hope that helps.
2007-07-02 08:22:04 · answer #2 · answered by glenn 7 · 0⤊ 0⤋
Your closing costs on the refinance will cut a bit into your equity (i.e. origination, processing, doc prep, etc.) unless you "cash out" more money. The only other way your equity can decrease after the refi is if the home depreciates in value......Otherwise, you can't lose it!
2007-07-02 08:20:19 · answer #3 · answered by R.E. Advice 3 · 0⤊ 0⤋
Nothing, unless you cash out some of your equity or roll the closing costs into the refi. Your equity otherwise remains your equity.
2007-07-02 08:13:59 · answer #4 · answered by Bostonian In MO 7 · 1⤊ 0⤋
You raise some good points here.
2016-09-20 04:58:20 · answer #5 · answered by Anonymous · 0⤊ 0⤋
I was thinking to ask this too
2016-07-29 08:53:13 · answer #6 · answered by ? 3 · 0⤊ 0⤋
amazed that I found this topic already answered! it is like you read my mind!
2016-08-24 07:28:25 · answer #7 · answered by ? 4 · 0⤊ 0⤋