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Submitted by Collette Royal
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Borrowing more money to pay old debt is referred to in finance" Refinance ”. The common acts that many people turn to includes“ Peer Share,”one of the revolving capital loan,paying for credit card’s debt or get cash from credit card to pay for shares.This is only a short-term liquidity solution. In this case interest’s difference and payment due date of capital and interest no longer important. This is not a right mind set for a long run financial health.It is found many cases that refinance without profit can only increase more debt and makes life more difficult.
However,refinance for people who shoulder home loan is important especially during this time when the interest rises. The difference of interest affects installment.
Practically,to refinance home loan is getting money from new loan to pay off old debt : capital interest and various fees to redeem mortgage security. This process should be arranged with the presence of a land officer. Then this mortgage security can be collateral for the new loan and the process of making the loan agreement should also be completed with the presence of a land officer.
All process stated above would be handled by the financial institution that gives you new loan. Therefore you don’t have to worry about the delay of the former financial institution that lent you money because the bank surely carefully calculates everything and do the agreement end of agreement or redeem ahead of schedule, the bank receives full interest anyway. Additionally,if you don’t pay full money according to an agreement ,the bank gets redemption’s fees ahead of schedule as the compensation of interest.
Before refinancing, legally, borrower should carefully read through an agreement made with the former financial institution including checking all expenses for refinancing as well as taking tothe former financial institution to decrease the interest.Surelyno bank would want to lose their good customer to other banks. However if customer has problem in repaying and liquidity, it’s impossible to negotiate for lower interest. Nevertheless, customer can refinance to better his liquidity and reduce his monthly repayment.
If customer could solve the problem of legal activity, next process is all about figure the benefit refinancer will get directly and indirectly. If you are thinking about refinancing, please consider 5 basic factors : new interest rate, loan’s condition, expenses in making new loan, cost of redemption prior to schedule and expenses to benefits comparison. Apart from these five factors, you should also consider other factors such as loan balance. If it’s not too much, you should not refinance because of little lower interest rate from the bank, might not worth it.
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