Required Cash

AAA

DEFINITION of 'Required Cash'

The total dollar amount that must be posted up front by the buyer to close a mortgage or to refinance an existing property. The required cash amount can include any of the following amounts if they are requested at closing:

-Any down payment
-Points or other fixed charges to the lender
-Insurance premiums
-Title insurance or per diem interest

The required cash should be expressed on the Good Faith Estimate of Settlement, which is a mandatory step in the lending process.

INVESTOPEDIA EXPLAINS 'Required Cash'

While taking out a mortgage used to require a 10-20% cash down payment, newer types of mortgages along with an easy credit environment relaxed standards to the point where many people were able to borrow large amounts with no down payment. That cost didn't just vanish, however, it was simply added to the principal due on the mortgage, leading to higher interest costs over the life of the loan. "No down payment" and "interest only" mortgages were one of the hallmarks of the subprime lending boom during 2004-2006, but many of these borrowers will end up having their homes foreclosed as a result of rising interest rates and lack of equity buildup.

RELATED TERMS
  1. No-Fee Mortgage

    A mortgage in which a mortgagee does not charge the mortgagor ...
  2. Subprime Mortgage

    A type of mortgage that is normally made out to borrowers with ...
  3. Subprime Lender

    A type of lender that specializes in lending to borrowers with ...
  4. Interest-Only ARM

    An adjustable-rate mortgage (ARM) with an initial interest-only ...
  5. Origination

    The process of creating a home loan or mortgage. During the origination ...
  6. Minimum Down Payment

    The minimum cash contribution that must be made by a borrower ...
RELATED FAQS
  1. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  2. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  3. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  4. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
  5. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>
  6. What are the financial consequences of filing for bankruptcy?

    The financial consequences of filing for bankruptcy are substantial and can be long-lasting. They include impacts on your ... Read Full Answer >>
Related Articles
  1. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  2. Home & Auto

    Wheels Of A Future Fortune

    Buy a quality car without driving your expenses through the roof.
  3. Budgeting

    Mortgages: How Much Can You Afford?

    Answering this means number-crunching as well as factoring in other considerations and expenses.
  4. Home & Auto

    Are Home Inspections Worth It- Price vs. Value

    If you’re wondering whether home inspection is worth the investment, the following information will help you decide.
  5. Home & Auto

    How the Fed Affects Reverse Mortgages

    An in depth look at how the Federal Reserve affects reverse mortgages.
  6. Investing

    Where Are Real Estate Stocks Heading?

    We summarize five economic reports that investors should monitor monthly to keep them informed of where real estate and its related stocks are heading.
  7. Home & Auto

    Protect Yourself Against Reverse Mortgage Scams

    You could lose not only money, but also your home, if you fall for these schemes.
  8. Home & Auto

    Find a Reverse Mortgage Lender You Can Trust

    Reverse mortgages are a notorious lending market. Follow these steps and the chances are good you’ll find a trustworthy, competent lender.
  9. Home & Auto

    Do You Qualify for a Reverse Mortgage?

    See whether you meet the age qualifications and other requirements for getting a reverse mortgage.
  10. Home & Auto

    Reverse Mortgages and Your Taxes

    It pays to know the tax benefits from getting a reverse mortgage. Two major considerations: Are the proceeds taxable and is the interest tax deductible?

You May Also Like

Hot Definitions
  1. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  2. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  3. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  4. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  5. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  6. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!