A borrower has a primary mortgage of $300,000 and a HELOC with a $50,000 outstanding balance. They want to refinance both debts into a single new mortgage of $360,000. The extra $10,000 will cover closing costs and a small amount of cash back. How should this be classified?
Correct Answer
B) Cash-out refinance because the new loan exceeds the first mortgage balance
Under TRID, this is a cash-out refinance because the new loan amount ($360,000) exceeds the outstanding balance of the first mortgage ($300,000) by more than the allowable threshold, even though the borrower is paying off existing secured debt (HELOC) against the same property.
Why This Is the Correct Answer
Under TRID, this is a cash-out refinance because the new loan amount ($360,000) exceeds the outstanding balance of the first mortgage ($300,000) by more than the allowable threshold, even though the borrower is paying off existing secured debt (HELOC) against the same property.
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