Cash-in Refinances Are on the Rise

Lots of borrowers lately, says the New York Times, are opting to do a cash-in refinance. As opposed to a cash-out refinance, in which a borrower pulls money out of their home and blows it on a European vacation or cocaine like the freewheeling days of years gone by, a cash-in refinance means a borrower puts in cash to get the loan.

Some borrowers bring in cash because they owe more than the lender will lend. But not everybody is in that boat. Some borrowers don't want to finance their closing costs.

My own refinance closed yesterday, and my husband and I paid all of our loan costs out-of-pocket. Fortunately, we have equity and could have financed those costs, but why? Why would we want to increase our loan balance? We refinanced from a 30-year amortized loan with 21 years remaining into a 15-year loan at 3.75%. We want to pay off our loan sooner than later.

Many borrowers who buy a home pay their closing costs in cash, why should a refinance be any different? There are some home buyers who ask the seller to pay their closing costs, but those borrowers are financing their closing costs. Unless a borrower really doesn't have the cash, doing a seller credit isn't the best way to pay closing costs. The financial mindset among borrowers seems to be changing, though. And that's a good thing.

More Articles by Elizabeth Weintraub:

• Pros and Cons of Wire Transfers vs. Cashier's Checks
  
• 10 Tips for Getting the Best Deal on a Model Home
  
• How to Pick a Price Range for Home Buying

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_{At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.}