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What is Cash-In Refinance?
A cash-in refinancing is basically when you pay off your existing mortgage under a certain LTV in order to qualify for a refinance mortgage. LTV is calculated by taking your mortgage divided by the value of your property.
Is a Cash-In Refinance a Good Idea?
A lot of homeowners seem to think so. According to Freddie Mac, more than a quarter of all mortgages refinanced in the second quarter of 2011 were “cash-in” refinances, where borrowers pay for a significant portion of their mortgage balance as part of the transaction.
At first glance, cash-in refinancing is a fairly simple solution for borrowers who would like to refinance but can not because of the decline in property values they’re left owing more on their mortgage than their property’s worth. But it tends to be expensive. To return to positive equity, homeowners may have to write a check for tens of thousands of dollars, if not more.
Generally you do not want to cash-in refinance unless you are sure it’s the best use of your money.
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