A married couple purchased a home together 3 years ago. Now they are divorcing, and one spouse wants to refinance the existing mortgage to remove the other spouse from the loan while keeping the same loan amount. The spouse remaining on the loan will be the sole borrower. How is this transaction classified?
Correct Answer
C) Rate-and-term refinance because no cash is being taken out beyond closing costs
This is a rate-and-term refinance under TRID regulations. Even though there's a change in borrowers, if no cash is taken out beyond closing costs and the primary purpose is to modify loan terms (removing a borrower), it's classified as rate-and-term refinance, not a cash-out transaction.
Why This Is the Correct Answer
This is a rate-and-term refinance under TRID regulations. Even though there's a change in borrowers, if no cash is taken out beyond closing costs and the primary purpose is to modify loan terms (removing a borrower), it's classified as rate-and-term refinance, not a cash-out transaction.
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A borrower refinances their home with a cash-out refinance loan of $750,000. The original loan balance was $400,000, and they're taking $300,000 in cash. If conforming limits allow $766,550, how is this loan classified?