What is the purpose of refinancing a building?

Question

How does refinancing work and what is the purpose of it. I'm trying to learn real estate so please be more detailed.

Answer 1

Shop for loan terms that are better than current mortgage loan.  Mainly, lower interest rate.  Application process similar to original mortgage.

Purpose:  a) lower interest costs via lower interest rate and/or b) leverage equity in property in order to make improvements.

Answer 2

Basically, refinancing spells one thing: you save money. When you refinance, you actually pay off your existing loans using the new loan that you have after refinancing. you can either "cash out" or opt for a "debt consolidation." Before you decide to refinance, you have to make sure first that you are going to stay in your home for a long time. You must also be ready to pay for mortgage fees for the refinance process; and lastly, you must identify if the value of your home in case interest rates fluctuates.

You can find out what your home value is in this website:

http://mortgages-for-everyone.com/

Answer 3

Refinancing has one of two purposes (or both):

1.  To lower/modify your interest rate.  This will either lower or raise your monthly payment depending on what you are trying to accomplish.

2.  Use the equity to take out additional cash.

Back in the heyday you could actually accomplish both, but right now it is a bit harder to borrow against the equity in your house.  Lending requirements (especially refinances) have become a lot more strict.

Answer 4

There are a variety of reason why people refinance property

1) They may be looking to lower the interest rate which can lower the pmt of the loan. Interest rates rise and fall and then people attempt to react to it by refinance of there loans to capture lower interest rates.

2) They maybe be looking to change the length of the term of pmts which can increase or lower pmt but will either pay off building faster or slower. Often time people are in short term loans that must be refinanced. Arms are an example This is known as an Adjustable Rate Mortgage. stay away from these! I call them exploding mortgages.

We call this amortization a good word to understand with this subject.

3) They maybe looking to increase loan to get cash out of the property to either do improvement or buy a new property or spend the cash and live on it.

4) They maybe looking to change lenders if they had bad service with there current lender or just have a lender that has more products available.

For example if I had a 100k mortgage and payed 800 a month on it and then refinanced an interest point less my pmt my go down 80 dollars or so per month. Then your pmt might only be 720 a month.

  I hope this helps you and good luck. At most libraries they have amortization handbooks you can see what your pmts will be yourself.