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 ?
BANKING AND CREDIT NEWS-June 8, 2015-CIFC Asset Management closes its 2nd CLO refinancing of 2015
and chief executive officer of Greystone Bassuk Group, announced the completion of a program to refinance nine Maxx Properties (Maxx) with refinancing proceeds aggregating $140 million.
The six per cent bonds, due in 2036, are part of a refinancing package that includes a $780 million direct loan from JBIC along with a $690 million commercial debt tranche.
The powerful Public Accounts Committee said local civil servants dealing in the refinancings often lacked vital commercial experience.
This article presents estimates, based on the survey findings, of changes in monthly payments resulting from refinancings, the amount of funds homeowners raised in the process, and how homeowners used the funds.
Such refinancings were subject, however, to a requirement that a new loan be primarily for the benefit of ESOP participants and their beneficiaries.
In this article, the prepayment propensity of FHA loans that result from refinancings is compared to that of FHA loans originated to purchase homes.
However, if you pay off the loan early--say, by refinancing again--you can deduct the remaining unamortized points that year.
Although no direct data on cash withdrawals at mortgage refinancings are available, recent evidence is supportive.
King & Spalding was responsible for structuring the Shari'ah-compliant refinancing, which was structured on an Ijara-wa-iqtina (lease-to-own) basis with a complex split structure due to the anchor tenant having already entered into a long-term lease.
Repeat refinancings under circumstances where the relative terms of the new and refinanced loan and the cost of the new loan do not provide a tangible economic benefit to the borrower.
The HMDA data show that lenders approve most home loan applications (table 5).(8) In 1992, lenders approved nearly three-quarters of the applications for home purchase loans and about 78 percent of the applications for refinancings. A lower proportion, about two-thirds, of the applications for home improvement and multifamily loans were approved.