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An extension and/or increase in amount of existing debt.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
For example, if you have your existing loan for 15 more years, then refinancing for 10 years plan will allow you to get complete ownership of the house in lesser time.
Completion of the potential refinancing is subject to completion of definitive agreements as well as market and other conditions.
The current interest rate environment is so good that it makes sense to consider refinancing, says Bond Stewart, Wells Fargo's Anchorage business banking manager.
Kallaur said, 'The National Bank, like other central banks, monitors the situation and assesses the need to increase/cut the refinancing rate or keep it unchanged.
In this year's first quarter, $7.7 billion in net home equity was cashed out from refinancing conventional prime-credit mortgages, according to Freddie Mac.
These results raise questions about why borrowers do not take advantage of refinancing opportunities that would substantially lower their interest payments.
Around 24 per cent of the refinancing requirement is attributed to the companies already in distress," the ratings agency said in a note on Thursday.
If a homeowner has a mortgage and a home equity line of credit, then refinancing the mortgage can help consolidate debt into one easy payment.
The peak annual refinancing requirement is now $97 billion in 2014, an increase from $89 billion in 2013.
Refinancing, in simplest terms, means one is paying off an existing mortgage by taking on a new mortgage.
Three BFIs including Citizens' Bank International, DCBL and Clean Energy Development Bank have applied to NRB seeking a total refinancing of Rs.
With President Obama's foreclosure plan, and the recent passing of the economic stimulus package, many Utahns ought to consider refinancing their home loans.