Refinance

Acquisition of a new loan to clear an existing loan. The payment schedule and the term of the loan will then change. Refinancing is killing two birds with one stone. First, the borrower has an extended loan maturity date while taking advantage of the economic conditions, such as reduced interest rates and acquisition of better property.

The new home loan could have a lower interest rate, or have a larger total amount than what is owed on your existing loan. While the first option is advantageous, the latter means that you have surplus cash from your mortgage with which you can use to fulfill other needs. This is referred to as equity take out.

Most individuals and businesses opt for refinancing when interest rates drop in order to take advantage of reduced monthly repayments. Refinancing also helps in consolidating bills, clearing expensive debt and improving one’s credit score.