A borrower purchased a home 6 months ago with a mortgage of $250,000. Due to rapidly rising property values, they now want to refinance to a loan amount of $280,000 to take advantage of better rates and receive some cash. The property has appreciated to $400,000. How is this transaction classified?
Correct Answer
B) Cash-out refinance because the new loan amount exceeds the existing balance
This is a cash-out refinance under TRID regulations. The timing of the original purchase doesn't change the classification - any refinance where the new loan amount exceeds the existing balance by more than closing costs is classified as cash-out, regardless of how recently the property was purchased.
Why This Is the Correct Answer
This is a cash-out refinance under TRID regulations. The timing of the original purchase doesn't change the classification - any refinance where the new loan amount exceeds the existing balance by more than closing costs is classified as cash-out, regardless of how recently the property was purchased.
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