(redirected from refinancings)
Also found in: Dictionary.


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


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 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 ?
Fueled by record low interest rates, homeowners have been cashing in on the tremendous savings realized by refinancing their mortgages at significantly lower rates.
Such refinancings were subject, however, to a requirement that a new loan be primarily for the benefit of ESOP participants and their beneficiaries.
The patterns of applications for refinancings by the income and race or ethnic characteristics of the applicants differed from those for home purchase loans.
The growth in refinancings also reflects innovations in the marketplace, including the greater availability of "no-fee" loans and more efficient processing of applications that helped reduce closing costs.
We understand the concerns that may have led to interest by the Congress in providing additional early information about costs in refinancings and in restricting certain creditor practices in loan prepayments and in loan term commitments.
Before the 1980s, virtually all refinancings involved the payoff of one fixed-rate mortgage with the adoption of a new fixed-rate mortgage.