refinance

Does a cash-out refinance hurt at sale time?

Don TaylorDear Dr. Don,
If you have a mortgage from a cash-out refinance, does it hinder you when you decide to sell your home?

Thank you,
-- Carol Cash-Out

Dear Carol,
The hindrance comes if a cash-out refinance forces you to bring money to closing to pay your real estate commissions, etc., because you don't have enough equity in your home to cover those expenses. Falling home prices can put you in that position, even if you had plenty of equity available when you financed using a cash-out mortgage.

In today's market, lenders are very cautious about allowing homeowners to tap the equity in their homes using a cash-out refinancing. With enough equity in your property, you'll be able to sell without having to bring cash to closing.

The other piece of the puzzle to consider is where a cash-out refinance might leave you if and when the time comes to purchase a new primary residence. If you've tapped out the equity in your existing home, you'll be scrambling to find the down payment for your new one.

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