A borrower owns their home free and clear and wants to obtain a $100,000 mortgage against the property to start a business. What type of transaction is this?
Correct Answer
B) Cash-out refinance
When a borrower places a new mortgage on a property they own free and clear, this is classified as a cash-out refinance regardless of the intended use of proceeds. The borrower is converting equity to cash, which is the defining characteristic of a cash-out refinance transaction.
Why This Is the Correct Answer
When a borrower places a new mortgage on a property they own free and clear, this is classified as a cash-out refinance regardless of the intended use of proceeds. The borrower is converting equity to cash, which is the defining characteristic of a cash-out refinance transaction.
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A borrower has a 30-year fixed mortgage and wants to pay it off in exactly 20 years without refinancing. What strategy would achieve this most efficiently?
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A borrower wants to finance a $600,000 home purchase with an FHA loan in an area where the conforming loan limit is $766,550 and the FHA loan limit is $472,030. What is the maximum FHA loan amount available?