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Refinancing Your Loan |
Refinancing refers to applying for a secured
loan
intended to replace an existing loan secured by the same
assets. The most common consumer refinancing is for a
home mortgage.
Refinancing may be undertaken to reduce interest costs
(by refinancing at a lower rate), to pay off other
debts, to reduce one's periodic payment obligations
(sometimes by taking a longer-term loan), to reduce risk
(such as by refinancing from a variable-rate to a
fixed-rate loan), and/or to liquidate some or all of the
equity that has accumulated in real property during the
tenure of ownership.
Certain types of loans contain penalty clauses that are
triggered by an early payment of the loan, either in its
entirety or a specified portion. Also, 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. Calculating the up-front, ongoing, and
potentially variable costs of refinancing is an
important part of the decision on whether or not to
refinance such as raising property tax after refinancing
which varied by regions. |
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