Bank wants to know why I want to cash out refinance

[Sewi Wawa]

Hi all! I am trying to do a cash-out refinance on my house that is completely paid off. The loan is in process, but in the mean time, my bank sent me an email asking me what I am planning to do with the money. I don't see why this is any of their business. The truth is that all of my assets are tied up in this house, and I'd like them to be liquid.

 I will be doing several things with that money including possibly investing into more real estate. Would they be scared that by investing into real estate, that I wouldn't be able to make my payments to them? Thanks for your help guys!

[Kyle J.]

The bank has every right to ask.  After all, it's YOU who wants to borrow THEIR money.  As such, they have the right to put stipulations on who they loan money to and for what purpose.  And some lenders do have policies prohibiting the purpose of the loan being to buy investment properties. 

If you truly just want to be "more liquid", then you might try listing your purpose as "to have cash reserves".  It's usually best to do your research on lenders before you apply and ask them up front if there's anything they do NOT allow the money to be used for, and then apply with the lender that best suits your individual needs.