What is meant by prepayments due to cash-out refinancing?
What will be an ideal response?
Cash-out refinancing means refinancing by a borrower in order to monetize the price appreciation of the property. Prepayments due to cash-out refinancing will depend on the increase in housing prices in the economy or region where the property is located. Adding to the incentive for borrowers to monetize price appreciation is the favorable tax law regarding the taxation of capital gains. The federal income tax rules exempt gains up to $500,000 . Thus,
cash-out refinancing may be economic despite a rising mortgage rate and considering transaction costs. Basically, cash-out refinancing is more like housing turnover refinancing because of its tie to housing prices and its insensitivity to mortgage rates.
You might also like to view...
According to GAAP, interest cost incurred to finance construction of an asset must be capitalized in which of the following situations?
A) when the asset is inventory that is routinely manufactured in large quantities on a repetitive basis B) when an asset is used in other than the earning activities of the firm C) when an asset is ready for its intended use D) when an asset is being constructed for a firm's own use
Current liabilities are those that can typically be paid off in full within 12 months
Indicate whether this statement is true or false.
Regarding variable life insurance, all of the following are true except:
A) provides no mortality or investment guarantees B) has flexible benefits based on investment returns C) allows the insured to choose how the cash value is invested D) is transparent with respect to costs and returns
Agencies may gather evidence in an informal manner, such as discussions with business managers
a. True b. False Indicate whether the statement is true or false