There are several ways you can be issued funds from a bank, due to the terms of a home loan. The most straight forward circumstance is an overpayment that you wish to be refunded. This might have merely resulted from a clerical error on your end. Instead of having the funds issued back to you, you may consider merely keeping the overpaid amount with the bank until the next payment comes due and have them apply the funds to that payment then, with you sending in the difference. Not all banks will accommodate such a request but it is a reasonable outcome. You likely will not be able to apply the overpaid funds to the principal or a future payment before that payment is due, without incurring early payment penalties. Mortgages are engineered to age; without aging, the mortgage will lose its ability to charge fees in the form of interest and other banking service fees.
You might be thinking that you could get money back from a home loan, in a somewhat similar way that you get money back from paying your taxes, in the form of a refund. Unfortunately, banks do not provide such incentives and it is unlikely that a bank will engineer mechanics into a loan that ever issues you money back.
If you operate a business out of your home through a home office, you could expense your mortgage payments in part. The part and percentage of that mortgage payment will be unique to your business operation at home and you’ll need to work with an accountant about the particular percentages of the mortgage payments that are allowed to be expensed. In this sense, you’ll be getting money back in the form of tax deductions on your business’s income.
This type of loan is only meant to secure a home purchase and not to provide the borrower with extra cash. These types of loans are secured by using the property as collateral for the amount borrowed. They will typically be amortized over a period of either 15, 30, or possibly even 40 years.
However, there is a way some individuals can secure funds through a second mortgage loan. One of the most common ways a borrower is able to obtain money from their property is by applying for a home equity line of credit (HELOC), which is a form of revolving credit. A HELOC also uses the borrowers property as colateral to secure the amount borrowed, so it is suggested to only take out a line of credit for major events such as high medical bills, college education, or maybe even home improvements. It is never wise to take on this debt to take care of everyday expenses or to buy something in which is not necessary at the time.
This type of loan is much like a credit card because of its revolving nature. When you get a HELOC the bank will set a certain limit as to how much the borrower can take out. For example, the bank allowed the borrower a line of credit up to $20,000. The borrower can draw upon this amount as much as they would like until the $20,000 is gone. However, failing to repay this loan can result in the loss of ones property. Mortgage servicers can pursue foreclosure if the borrower fails to meet their obligations.
Home loans are riddled with fees to the borrower instead of measures that enable issuing funds to the borrower. They often leave these outcomes to restructuring and loan modifications that may end up saving the borrower additional money over the course of the loans term.
My name is Maurice “Moe” Bedard. I am the founder of America’s #1 Mortgage Forum, LoanSafe.org. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications.