Refinancing, sometimes known as a “refi,” is the process of changing the terms of an existing credit agreement, typically one that involves a loan or mortgage. When a person or company chooses to refinance a credit obligation, they are essentially looking to adjust the interest rate, the repayment schedule, and/or other contract terms in a way that benefits them. If accepted, a new contract that replaces the initial one is given to the borrower.
When the interest rate environment significantly changes, borrowers frequently decide to refinance, which could result in possible savings on loan repayments from a new agreement.
In general, consumers want to refinance some debt in order to get better borrowing terms, frequently in response to changing economic situations. Refinancing is sometimes done with the intention of lowering the fixed interest rate, lengthening the loan’s term, or switching from a fixed-rate mortgage to a customizable mortgage (ARM) or vice versa.
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