What is refi or refinance
Refi, or refinance, in definition is a loan that changes an existing debt’s terms. The colloquial or slang term for refinance, refi, is for people who want to refinance a home mortgage. Some people ask for a refi loan to secure lower interest rates or to eliminate some equity owned in the house, which may have been used to pay off debts with high interest rates, to invest in improvements in the home or to meet any other financial obligation.
The term of your old loan will be superseded by the new refi loan. This means that new terms or interest will be established. Monthly payments as well as the schedule of payments may also be changed by the refi loan. When interest rates are decreased, the monthly payments may be lowered as well because of less interest. However, not everyone who obtains a refi (refinance) loan pays fewer amounts a month.
Some borrowers may in fact, pay more if they are interested in eliminating equity from the house. When the value of their housing rises, homeowners may discover that they have a larger amount of cash value in their houses. They have the option of cashing out some of such value and raise their debt at the same time. This may result in higher monthly payments and may come with risks if some little equity is left for their house. If the home value drops, the debt may go upside down and the debt amount for the home may exceed.
Another reason why people get a refi (refinance) loan is to do debt restructuring. If a large amount of debt is owed with high interest rates such as credit cards, the person owing the amount might be interested to lower the interest levels by payment of the debt. They then attach the debt to a new loan, thus decreasing their home equity. This can however help them get lower monthly payments for the loans.
Read more
Filed Under interest rates, lower rates, mortgages, refi, refi (refinance) | 16 Comments
keep looking »