Refi is a popular word these days when it comes to financial matters. Refi is the buying or selling of a financial obligation (such as a home loan, auto loan, student loan, etc. ), and the resultant exchange of one obligation for another. A refi can also be the purchasing of a home or other high-priced assets.
A refi is just a refinancing that taking out a new loan, but refinancing does not include any payments. A refi is a very useful financial tool when interest rates are dropping and you cannot find a better refinance deal than what you may have at present. Refinancing is also a convenient way for some people to lower their monthly bills or even their mortgage rates. And with interest rates dropping further, refinancing today is more beneficial than ever.
Refinancing is an adjustment to the original terms of a loan, which includes adjusting the interest rate and/or the payment schedule. Refinancing can be voluntary, in which case the borrower waives his rights to offset the original loan debt by a certain amount. In this case, if the refinance results in a lower payment, the borrower will have to pay less to the lender; however, this means giving up some of the protection provided by the mortgage. In most cases, refi is a result of the lender requiring borrowers to buy a new loan to pay off the old one.
Most homeowners who refinance do so because of a fixed-rate mortgage with a shorter payback term. As time goes on, many homeowners who originally took advantage of low interest rates drop into negative equity. Because the loan term is too long, they realize that they are paying more money to the lender than they would if they had refrained from refinancing. At this point, refinancing is the only option. Here are a few tips for how you can refinance to keep your home when the interest rates drop.
Examine your current loan agreement carefully to see what type of adjustments you are currently eligible for. Many homeowners refinance in order to eliminate balloon payments, accrued fees, and excessive interest charges that have built up over time. To make sure you qualify for these types of refinancing requests, ask your loan servicer for a refi package. Your current lender may not be willing to consider adjusting your interest rates or reducing the outstanding balance due as part of this package. Check online for several lenders who are willing to refinance your loan in this manner.
Another reason to refi to raise your equity is to take advantage of a lower initial loan amount. Lenders will sometimes refinance homeowners with a smaller initial loan amount in order to make a larger payment on a new loan. In many cases, this will save the borrower money because refinancing will reduce the overall amortization period by reducing the overall principle and increasing the interest rate. The result is that homeowners can benefit from increased monthly payments and lower interest rates for a longer period of time.
For borrowers who are looking to refinance to lower their payments and interest rates, it is possible to do so by switching to a variable-rate mortgage loan. Fixed-rate loans are tied to an interest rate and cannot be affected by fluctuating interest rates or market conditions. Variable-rate loans are based on market movements and may change with the rates in the market. A fixed-rate loan can also be beneficial if borrowers find that their income is temporary and they anticipate future increases in income. Borrowers with large equity in their home may also benefit by switching to this type of loan.
The decision to refi should not be entered into lightly. Careful comparison among lenders is important in order to ensure that the refi will not hurt equity and cause more harm than good. In order to ensure that the refi will not negatively affect the borrower, potential lenders should approach an independent mortgage broker to help them evaluate their options. Brokers have the benefit of lending you a hand if you decide that refinancing is the way to go. You can ask the broker to gather information on several potential lenders and compare the advantages and disadvantages of each before deciding. A good broker can also tell you what lenders are offering the best deals in terms of interest rates.