Refinancing is a financial term used for changing terms of your current debt, either with the same financer or with a different one, in order to achieve following goals:
To consolidate other debts into one loan. When you are having more than one debts and it is hard to manage them separately, you should refinance them into one loan to help ease the process of tracking your liability payments, and thus your monthly budgets. You may also be inclined to consolidate your debts to avoid fees and penalties on separate debts, and again, achieve the goal of easily managing your debts.
To take advantage of a better interest rate available in the market. If the interest rates have fallen from the time when you engaged into your current debt(s), you should refinance your debt(s). Here your judgement and financial observation would be required for deciding on when to refinance. If you feel that interest rates would go further down, you may opt to hold refinancing. But be very watchful and do no wait long enough and refinance as soon as you get best interest rates offers. To be more aware, always keep yourself updated with news and announcements from the Government and/or Central Banks regarding interest rates and other Monetary Policy actions.
To reduce monthly repayment amount. When you are paying an amount of money from your budget that is becoming un-affordable, you may opt to refinance.
To use cash for investing or more interest paying saving opportunities. If you are planning to use a portion of your budget that is going for extra payments for, either investing in some high interest paying opportunity or a better savings scheme, or even for retirement, you may also chose to refinance your debt and use the freed cash to invest.
To reduce or alter risk. When markets are volatile and interest rate is fluctuating so very often, and you are a risk averse person, you should refinance your variable interest based debt to a fixed interest rate debt to ease yourself of the stress of ever changing interest rates. If you plan to stay in your home for years, and you are currently in an adjustable-rate mortgage, you should strongly consider a refi. ARMs are incredibly dangerous - the financial equivalent of Russian roulette, but with multiple bullets. Refinancing into a 30-year fixed-rate loan may not cut your current monthly payments by much, but it gets rid of the risk that those payments will suddenly skyrocket.
To consolidate other debts into one loan. When you are having more than one debts and it is hard to manage them separately, you should refinance them into one loan to help ease the process of tracking your liability payments, and thus your monthly budgets. You may also be inclined to consolidate your debts to avoid fees and penalties on separate debts, and again, achieve the goal of easily managing your debts.
To take advantage of a better interest rate available in the market. If the interest rates have fallen from the time when you engaged into your current debt(s), you should refinance your debt(s). Here your judgement and financial observation would be required for deciding on when to refinance. If you feel that interest rates would go further down, you may opt to hold refinancing. But be very watchful and do no wait long enough and refinance as soon as you get best interest rates offers. To be more aware, always keep yourself updated with news and announcements from the Government and/or Central Banks regarding interest rates and other Monetary Policy actions.
To reduce monthly repayment amount. When you are paying an amount of money from your budget that is becoming un-affordable, you may opt to refinance.
To use cash for investing or more interest paying saving opportunities. If you are planning to use a portion of your budget that is going for extra payments for, either investing in some high interest paying opportunity or a better savings scheme, or even for retirement, you may also chose to refinance your debt and use the freed cash to invest.
To reduce or alter risk. When markets are volatile and interest rate is fluctuating so very often, and you are a risk averse person, you should refinance your variable interest based debt to a fixed interest rate debt to ease yourself of the stress of ever changing interest rates. If you plan to stay in your home for years, and you are currently in an adjustable-rate mortgage, you should strongly consider a refi. ARMs are incredibly dangerous - the financial equivalent of Russian roulette, but with multiple bullets. Refinancing into a 30-year fixed-rate loan may not cut your current monthly payments by much, but it gets rid of the risk that those payments will suddenly skyrocket.
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