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Refinancing
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The process of paying off one loan with proceeds from a new loan using the same property as Security.
Refinancing refers to the replacement of an existing Debt obligation with a Debt obligation bearing different terms. The most common consumer refinancing is for a home mortgage. Refinancing is done to reduce Interest costs (by refinancing at a lower rate), to extend the repayment time, to Clear other debts, to reduce one's periodic payment obligations (sometimes by taking a longer-term loan), to reduce or alter Risk (such as by refinancing from a variable-rate to a fixed-rate loan), and/or to raise Cash for investment, consumption, or the payment of a Dividend.
Refinancing can change the monthly payments owed on the loan either by changing the loan's Interest rate, or by altering the term to maturity of the loan. More favorable lending conditions may reduce overall borrowing costs. Refinancing is used in most cases to improve overall Cash flow. Another use of refinancing is to reduce the Risk associated with an existing loan.
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Privatebanking.com
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