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.

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.


Investment dictionary. . 2012.

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