Finance
A Washington borrower refinances their home to access equity. The loan that replaces the original loan and provides additional cash is called a:
ASecond mortgage
BCash-out refinance✓ Correct
CHELOC
DBridge loan
Explanation
A cash-out refinance replaces an existing mortgage with a new, larger loan. The borrower receives the difference between the new loan amount and the old loan balance as cash, effectively accessing home equity.
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Key Terms to Know
Loan-to-Value Ratio (LTV)
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Math Concepts
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