Refinancing


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Refinancing

An extension and/or increase in amount of existing debt.

Refinance

To repay a loan by taking out another loan. Refinancing can allow one to secure a lower interest rate; for example, one can replace a loan at an 8.5% rate with one at 5.5%. In the case of a balloon loan, refinancing can repay the principal if one does not have sufficient funds to do it; that is, if one has made only interest payments over the life of the loan and has not saved the principal amount when the loan comes due, refinancing can prevent bankruptcy. There are two main drawbacks to refinancing. First, there is no certainty that one will be approved for it. One thus takes a risk every time one decides to make only interest payments on a loan or mortgage. Secondly, refinancing generally resets the repayment period; that is, if one refinances six years into a 10 year loan, the one generally repays the new loan over 10 years instead of the remaining four.

Refinancing.

Refinancing is the process of paying off an existing loan by taking a new loan and using the same property as security.

Homeowners may refinance to reduce their mortgage expense if interest rates have dropped, to switch from an adjustable to a fixed rate loan if rates are rising, or to draw on the equity that has built up during a period of rising home prices.

Closing costs for a refinance are generally comparable to those for any mortgage. If you're refinancing to reduce your payments, you'll want to calculate how long it will take before you recover the closing costs and begin to save money.

If you're planning to move within a few years, refinancing may not actually save you enough to justify the closing expenses. And if you refinance to use some of your home equity, you run the added risk that prices could drop and you could end up owing more on your mortgage than you could realize from selling your home.

References in periodicals archive ?
This is the case for those who already refinanced during the 1991-96 period and for recent purchasers who were waiting for further rate movement before refinancing.
Refinancing for $412,500 for a two story, non-elevatored building containing three commercial units located in Clifton, NJ;
Refinancing has been credited with saving the nation's economy in the last several years, when homeowners took out billions of dollars of equity in their homes in cash and poured the money into home remodeling, car purchases, college funding and paying down credit-card debt.
Discounted, after-tax interest savings resulting from refinancing must be enough to offset after-tax closing costs.
refinancing for $95,000 for a three story, mixed use, non-elevatored building containing one Class A apartment and two commercial units located in Brooklyn, NY.
How do you know whether refinancing is really worth it?
7 billion in net home equity was cashed out from refinancing conventional prime-credit mortgages, according to Freddie Mac.
However, the guide also makes sure to inform homeowners when refinancing may not be the smartest financial decision.
The company also disclosed that more than 500,000 borrowers have accessed Fannie Mae's online assistance to inquire about the possibility of refinancing their loan under the Obama Administration's refinancing plan, and more than 80,000 callers have contacted Fannie Mae's national hotline since the plan was announced.
Refinancing in the amount of $105,000 for a four and one-half story non-elevatored building containing five Class A apartments located in New York, NY.
And maintain a good credit rating so that you can maintain the upper hand in determining your options when it comes time to refinancing into a traditional loan.
Under the final regulations, a refinanced loan may be treated as two loans in one--a continuation of the prior loan, plus a new refinancing loan equal to the difference between the prior loan balance and the refinanced amount.