Cash Out Mortgage Refinancing

by Anne A.
(Arlington, Virginia USA)

Regarding cash out mortgage refinancing -- Kate, I recently applied for a mortgage and provided all requested financial information. My loan to value is less than 50 percent. I am a retired Federal employee so my income is secure. My credit score is 760.

I have asked to cash out 25,000 dollars. They now request a letter from me stating why I want the money.

They have also informed me that there have been 3 requests for my credit. How could I possibly know? Won't it take months to get this info from the credit bureau?

I am suspicious that interest rates have gone up and they are trying to get out of the locked in rate. The question asking why I want the money seems particularly offensive. They could decide that any reason I give is impermissible.

The truth is I want to invest the money for the long haul and increase my liquidity. But what if they say this is not a good enough reason, speculative or financially unsound. What if I want to give it to the church or my unemployed niece, or go around the world, take up poker, or get myself a boy-toy.

Do they get to make a judgment about this? Is this question a pretext to get out of the loan, and any answer I give is not OK with them? If I give them one reason and then my life circumstances change and I do something different, can I be accused of fraud?

Kate Answers: Cash Out Mortgage Refinancing

Ask Kate at
Dear Anne, The familiar saying...

"He who has the gold makes the rules"
applies here. Can they ask for the purpose of the cash? Yes they can and actually have for many years.

Especially during severe economic times, lenders are wary of cash out during mortgage refinancing, even when the homeowner is qualified to borrow the money.

Your answer to their question can make or break a mortgage approval. Learn here what to do if your mortgage approval hiccups.

Generally, lenders prefer cash out mortgage refinancing when the purpose is for home improvement. However being truthful is important.

This is the very reason I provide this set of questions to be used while shopping for a mortgage -- Unique Questions To Ask A Mortgage Lender. As you have discovered, the best time to ask qualifying questions is BEFORE you apply for a mortgage.

Anne, you mentioned locking in your mortgage rate so I have included links to my Rate Lock Guide down below. It's your rate and your payment, after all!

Best Wishes,

Ask Kate

PS If you still have questions regarding cash out mortgage refinancing, write me at Ask Kate where every question is a good question.

PPS The primary purpose of asking about credit inquiries is to uncover any newly issued credit. If you have not recently opened new accounts, ask the lender which companies generated the inquiries so you can address them.

In the past, many of my borrowers simply did not know the answer either. So they stated they had not opened new accounts and did not recognize the companies looking at their credit.

Finding Help for Locking Rates

My Interest Rate Lock Guarantee - Help for timing your rate lock.

The best solution to avoiding hidden fees is to ask the right questions before you lock mortgage rates.

Get mortgage broker fees in writing or your rate lock is meaningless!

How good is a mortgage interest rate lock guarantee?

Yield Spread Premium is a common reason for losing your rate lock.

Questions to ask before you lock.

Search questions and answers at Ask Kate Mortgage Rate Lock Center I.

More questions and answers at Ask Kate Mortgage Rate Lock Center II.

Home to Get Your Best Mortgage Rate from Cash Out Mortgage Refinancing

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You can also ask Kate about your mortgage at Refinancing Advice The Nuts and Bolts.

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