What Is A Tangible Net Benefit?
Author:
Kevin GrahamSep 13, 2024
•10-minute read
There are a few reasons a homeowner might choose to refinance their home. These include lowering their rate, changing the term of the loan (that is, the length of the loan), taking cash out for an investment/renovation, or using a cash-out refinance for debt consolidation.
Of course, home financing is complicated, and you want to make sure you’re getting a deal that’s in your best interest when you apply to refinance. This serves as a safeguard against predatory lending practices. To that end, lenders must make sure the refinance accomplishes one or more tangible net benefits for the client.
Tangible Net Benefit, Defined
A tangible net benefit (alternatively referred to as a “net tangible benefit”) can be thought of as the financial advantage a client gains by refinancing. When you refinance your mortgage loan, you’re taking on a completely new loan. Many states and even the federal government require there to be a defined benefit for you in many cases.
If you’re a resident of states with these types of homeowner protection laws, there must be a tangible net benefit to any refinance you undertake. This restriction is also true if your loan is backed by certain federal agencies like the Department of Veterans Affairs (VA) or Federal Housing Administration (FHA).