Dream Loans, Mortgages, and Refinance 4 U: Refinance

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.

Advantages

Refinancing may be undertaken to reduce interest costs (by refinancing at a lower rate), to extend the repayment time, to pay off 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.

In essence, refinancing can alter 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 favourable lending conditions may reduce overall borrowing costs.

Another use of refinancing is to reduce the risk associated with an existing loan. Interest rates on adjustable-rate loans and mortgages shift up and down based on the movements of the various indicies used to calculate them. By refinancing an adjustable-rate mortgage into a fixed-rate one, the risk of interest rates increasing dramatically is removed, thus ensuring a steady interest rate over time. This flexibility comes at a price as lenders typically charge a risk premium for fixed rate loans.

In the context of personal (as opposed to corporate) finance, refinancing a loan or a series of debts can assist in paying off high-interest debt such as credit cardUnited States, there may be certain tax advantages available with refinancing, particularly if one does not pay Alternative Minimum Tax.

Risks

Most fixed-term debt contains penalty clauses (known as "call provisions") that are triggered by an early payment of the loan, either in its entirety or a specified portion. In addition, there are also closing and transaction fees typically associated with refinancing debt. In some cases, these fees may outweigh any savings generated through refinancing the loan itself. Typically, one only rationally considers refinancing if the potential for a substantial cost savings exists, or if there is a need to extend the loan due to weak cash flow or other non-recurring committments.

In addition some refinanced loans, while having lower initial payments, may result in larger total interest costs over the life of the loan, or expose the borrower to greater risks than the existing loan, depending on the type of loan used to refinance the existing debt. Calculating the up-front, ongoing, and potentially variable costs of refinancing is an important part of the decision on whether or not to refinance.

Points

Main article: Point (mortgage)

Refinancing lenders often require an upfront payment of a certain percentage of the total loan amount as part of the process of refinancing debt. Typically, this amount is expressed in "points" (also sometimes called "premiums"), with each "point" being equivalent to 1% of the total loan amount. Therefore, if the refinance option selected involves paying three points, then the borrower will need to pay 3% of the total loan amount upfront. Most refinancing lenders offer a variety of combinations of points and interest rates. Paying more points typically allows one to get a lower interest rate than one would be capable of getting if one paid fewer or no points. Alternately, some lenders will offer to finance parts of the loan themselves, thus generating so-called "negative points" (also called discounts).

The decision of whether or not to pay points, and how many points to pay, should be taken in consideration of the fact that with points, one tends to trade a higher upfront cost in exchange for a lower monthly premium later on. Points can be paid out of the cash saved by refinancing the loan in the first place.

Types

No-Closing Cost

Borrowers with this type of refinancing typically pay few upfront fees to get the new mortgage loan.^{[citation needed]} In fact as long as the prevailing market rate is lower than your existing rate by 1.5 percentage point or more, it is financially beneficial to refinance because there is little or no cost in doing so.^{[citation needed]}

Cash-Out

This type of refinance may not help lower the monthly payment or shorter mortgage periods. It can be used for home improvement, credit card and other debt consolidation if the borrower qualifies with their current home equity; they can refinance with a loan amount larger than their current mortgage and keep the cash difference.

References

External links

U.S. Department of Housing and Urban Development - Streamlining your Mortgage
U.S. Department of Veteran's Affairs - Mortgage Refinancing Information

Refinancing in Sri Lanka

Lender House

What We Do - business refinancing, business loan refinancing, and acquisitions

Lender House is an online loan and financing company owned by Premiere Lender.

Premiere Lender is an online loan company focused on matching borrowers with potential lenders in the field of business loans, business financing, corporate lines of credit and acquisition financing. We were founded by an established investment banking firm, in business since 1980.

Premiere Lender receives more than $1 Billion in business loans and acquisition financing requests monthly.

Types of Business Loans:

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Asset - based facilities on a fully secured basis and Cash flow based business credit facilities

TRANSACTION TYPES
Refinancing and restructuring of business loans and corporate loans, Management and Leveraged Buyouts, Recapitalizations, Merger Financing, Business Acquisition Financing, New Business Lines of Credit

COLLATERAL TYPES
Accounts Receivable, Inventory, Machinery & Equipment, Real Estate, and / or Stock and Bonds

INDUSTRY TYPES
All types of Manufacturing, Wholesale, Distribution, and Service companies - Public and Private

SALES VOLUMES
Companies with Annual Sales of $2 million - $100 million and more

BORROWING NEEDS
Secured Lines of Credit from $1 million to $25 million and more

FINANCIAL PARAMETERS
Companies that are highly leveraged, have or had financial losses, low or negative net worth (equity), and / or with poor historical performance. Also companies experiencing a leveraged buyout, management buyout, acquisition, recapitalization, restructuring, or turnaround situation, debtor-in-possession, sub-prime and non-prime business loans, or companies in a growing mode where sales and asset growth are ahead of working capital needs.

If you are a prospective client that fits within these financing requirements, please use our Contact Us secure form for a rapid confidential response.