what happens when you refinance a loan

Best answer

When you refinance,youreplace an existing loan with a new loan that pays off the debt of the old loan. 1 锘?The new loan should have better terms or features that improve your finances. 2 锘?The details of what the refinancing looks like depend on the type of loan and your lender,but the process typically unfolds as follows:

People also ask

  • What does it mean to refinance a mortgage?

  • What Is Refinancing? A mortgage refinance refers to the process of getting a new loan for your home. When you refinance, the new mortgage loan pays off the old one, so you鈥檙e left with just one loan and one monthly payment. There are a few reasons people refinance their homes.

  • What happens if you refinance Your House but don鈥檛 pay?

  • Your property might still be required as collateral for the loan, so you could still lose your home in foreclosure if you refinance a home loan but don鈥檛 make payments. Likewise, your car could be repossessed if you default on the new loan.

  • What are the benefits of refinancing a loan?

  • A common reason for refinancing is to save money on interest costs. To do so, you typically need to refinance into a loan with an interest rate that is lower than your existing rate. Especially with long-term loans and large dollar amounts, lowering the interest rate can result in significant savings. Lower payments.

  • Should you refinance to a longer or longer term?

  • Securing a lower refinancing rate reduces your cost of borrowing so you鈥檒l pay less on your personal loan, overall. If you鈥檙e struggling to make your minimum loan payments, refinancing to a longer loan term offers lower minimum monthly payments (though you鈥檒l pay more toward the loan overall due to interest charges).

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