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A Boston condo owner wants to know: What’s a cash out re-fi?

If you’ve owned your downtown Boston condo for a while and want to tap into the equity of your place, one option is to arrange for a cash-out refinance. This is where you renegotiate the terms of your mortgage in order to access the money tied up in your Boston condo.

Instead of having the mortgage go entirely towards the cost of buying the property, you are putting some of what you’re borrowing in your wallet. When you refinance it allows you to change lenders, reduce your rate or access the equity. Banks will ask you how you intend to use the cash. “It needs to be used for investment, renovation, or to consolidate debt.

Which downtown Boston condo owners is it right for?

A cash-out refinance is open to owners of condos, townhouses or one- to four-family buildings.

Downtown Boston residents who have seen their Boston condominium increase in value are those who are best able to take advantage of the program. 

What is a typical rate for a Downtown Boston condo owner?

Your rate will depend on “the factors of the transaction. That means the property type, the loan-to-value ratio, the loan amount, how much cash you want out of the arrangement, and the loan program itself. All these details add up to a level of risk for the bank. 

Cash-out is seen as riskier than other types of loans. “As with any loan, rates move up and down. In general, cash-out refinance rates will be slightly higher than purchase or rate and term transactions.

Preparing for a cash-out refinance on your downtown Boston condo

Before you speak to a mortgage lender about a cash-out refinance, find out the value of your property. Ask the agent who sold you the house to do a comp search, they are usually happy to help. The lender will do an appraisal anyway but it’s a good idea to be in the ballpark to find out what the equity might be.

Don’t assume you will be able to get the cash, and if you plan on using the money to redo a kitchen or bathroom.

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