Refinancing Mortgage Lending Practices
When a mortgage lender allows a borrower to obtain further money advances at a later date, it is called an open-end-mortgage. The amount of the advance is usually limited to the difference between the original home loan amount and the current amount owing. Terms of repayment will depend on prevailing interest rates and the condition and value of the pledged property at the time of the advance.
The alternative is to refinance a home mortgage by obtaining a new loan that is large enough to pay off the existing loan and leave cash left over. Refinancing a home mortgage is a popular way of taking cash out of a property that has appreciated in value. For example, suppose you bought a house in 1970 for $40,000 using $10,000 cash down and a mortgage for $30,000. Today the house is worth $100,000 and the mortgage balance is $25,000. If you can qualify financially, you can get a new loan on the house for $75,000. This would pay off the $25,000 existing loan and leave $50,000 in your pocket. Your new payments would, however, be much larger and would be at current interest rates.
Refinancing To Reverse Mortgage