2007-02-10 11:45:39 · 4 answers · asked by Kate 3 in Business & Finance ➔ Personal Finance
When you have one loan or mortgage at a certain interest rate and with certain terms, including how much you pay each month and for how long, you can refinance the loan so you'll have different terms of the loan. Usually, people refinance to get a lower interest rate, which lowers their month payment (as well as the total interest they will pay over the life of the loan); but the term, "refinance" really just means undoing the existing terms and establishing new ones.
2007-02-10 11:57:24 · answer #1 · answered by WhiteLilac1 6 · 0⤊ 0⤋
Refinance is a new loan.
Some wise people just refi the amount owing when they find a lower rate BUT
Some take out extra debt and really burden themselves with huge extra monthly payments for years longer, just to get a few $$$$ cash now.
2007-02-10 19:52:29 · answer #2 · answered by kate 7 · 0⤊ 0⤋
Hopefully you are getting a better intrest rate. Possibly lowering your monthly payments. But basically you are restarting your mortgage from day one with a new principle balance of what is left on your mortgage. If you are 10 years into a 30 year loan, you are restarting with 30 years left of payments. But if you go down 1% or more with in 5 years of your origional loan, you could potentially save tens of thousands of dollars in intrest. 1% of 100,000 is $1,000. But you have to compound it so it is considerably more. But be warry of intrest only loans, they screw you because you pay all the intrest upfront. Also beware of extra hidden costs. Make sure the cost will be overcome before you sell the house.
2007-02-10 22:09:58 · answer #3 · answered by Margaret R 1 · 0⤊ 0⤋
You are trying to lower your payments either by getting a lower rate or better terms of the loan. You may have an option to take cash out if you have enough equity in your homes' value. That depends on your loan to value (ltv ratio).
2007-02-10 19:49:47 · answer #4 · answered by William's Mum 2 · 0⤊ 0⤋