Question by marcus s: explain basics of mortgage refinancing to me please…?
let’s say that i bought a 100,000 dollar house two years ago. for the sake of simplicity, i put no money down and i borrowed all of the money for the house from the bank. now (after two years), i have 20,000 dollars of equity in the house and i still owe the bank 80,000 dollars. the value of the house has doubled during this time to 200,000 dollars.
how would refinancing work in this example? i would borrow 80,000 from someone else but i would get a lower rate b/c i now own a 200,000 house (instead of a 100,000 dollar one)?
and how does “cashing out” work?
Answer by GW
You borrow 80k and get a lower rate because rates in general are lower and the amount is lower (80k vs. 100k).
By cashing out, you would increase the size of your loan. for example, from 80k to 150k, and use that 70k like cash.
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