Before I explain the cash out refinance meaning, I will tell you what
refinancing is. It is a process of replacing an existing debt obligation with a new one, under different terms. Usually, people refinance to pay off the loan earlier than expected, to change the tenure of the loan,
or
to avail better interest rates on their housing loan.
Cash Out Refinance ExplainedIt is a process of refinancing your housing loan, while also borrowing extra money at the same time. The new lender takes over your existing housing loan, while also issuing you a cheque for the surplus funds you’ve borrowed. From now on, you’ll have to pay the monthly EMIs for the current housing loan as well as the new loan borrowed from the new lender.
I hope now you know
what is a cash out refinance
.
Let’s understand this using an example.
Let’s say that Priyanka still owes Rs. 20 lacs on her housing loan to her lender. She now needs an extra Rs. 5 lacs for covering the cost of some remodelling work in her house. By going for a cash-out refinance, she can start a new housing loan worth Rs. 25 lacs. The new lender will pay off the outstanding Rs. 20 lakhs to her old lender and gives her Rs. 5 lacs for covering the remodelling costs. She continues to pay EMIs to the new lender till she has paid off the whole Rs. 25 lacs along with the interest she owes.
What is A Limited Cash Out RefinanceA limited cash-out refinance replaces an existing mortgage with a new one, at a bit higher loan amount. It is perfect for you if you want to add your refinancing costs to the new loan balance instead of paying them yourself
Take a Housing Loan at Minimal Documents from NoBroker’s Partner Banks and Purchase Your Dream Property Easily!
Advantages of Cash-Out RefinancingLong repayment tenure
Low-interest rates
You can avail huge sum of money
Pre-closure penalties
Drop in your credit score
Increase in loan burden
Risk of foreclosure
Take the Help of NoBroker’s Legal Experts if You Want Help in Drafting Home Loan Application!
Read more:
What are the factors we need to consider to avail home loan?
Can you convert personal loan to home loan?
What is home loan process?
This is all on the cash out refinance meaning.
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What is a cash out refinance?
Lagan
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2022-06-06T18:25:30+00:00 2022-06-06T18:45:43+00:00Comment
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