The term "estimated cash to close to borrower" generally refers to the amount of money that the borrower will receive at closing, typically in a refinancing transaction. This happens when the new loan amount exceeds the amount needed to pay off the existing mortgage and cover refinance fees, resulting in extra cash given back to the borrower at closing. This is different from "cash to close from borrower," which is the amount the borrower must pay out-of-pocket to complete a home purchase, including down payment, closing costs, and prepaid expenses
Key Points:
- Estimated Cash to Close From Borrower: The preliminary estimate of how much cash the buyer needs to bring to closing. It includes the down payment, closing costs, and prepaid costs but excludes the mortgage loan amount. This is money the buyer must have available to complete the purchase
- Cash to Close To Borrower: In refinancing, this is the extra money the borrower receives at closing because the new loan amount is higher than the payoff and fees. This cash can be used for other purposes like debt consolidation or savings
- The cash to close amount is finalized in the Closing Disclosure provided by the lender before closing, which details all costs and funds required or returned
Example:
- If you are buying a home with a $20,000 down payment and $5,000 closing costs, minus $3,000 seller credit, the cash to close from borrower would be $22,000.
- In a refinance, if the new loan is $310,000 but paying off the old mortgage and fees totals $305,000, the cash to close to borrower would be $5,000, which you receive at closing
In summary, "estimated cash to close to borrower" means the estimated amount of money the borrower will get back at closing, mainly relevant in refinancing scenarios where the loan amount exceeds the payoff and closing costs.
