Refinancing is a term that is not included in the dictionary of the Royal Spanish Academy (RAE). The concept derives from financing, which is the action and the result of to finance (pay an expense, grant the capital that is needed for something). This verb, in turn, we can establish that it derives from the French “financer”, which can be translated as “defray a debt” and that it emanates from the Latin, specifically, from “finis”, which is synonymous with “end”.
Knowing the meaning of financing and financing, and from the inclusion of the prefix re-, we can affirm that refinancing consists of refinance. The notion is often used specifically when introduce changes in the conditions of a financing already granted.
Typically, refinancing consists of a reduction of the fee paid and in a interest rate cut, allowing the debtor to pay the loan in a longer term. The objective is to adapt the return of the credit to the real income of the person who must pay off the debt so that it is not unpayable.
The debtor, therefore, requests a refinancing when he needs to pay less in each installment or when he wants to cut the interest that he will pay at the end of the credit. For the creditor, accepting the refinancing is a way to facilitate the payment of the loan to the debtor, reducing the risk of default. In other words: the creditor agrees to receive less money than agreed in the original financing since he prefers to ensure that income and not for the debtor to stop paying.
In some cases, refinancing even includes a Grace period in which the debtor does not have the obligation to pay the debt installment, in order that he can order his finance or generate resources.
In the realm of mortgages is where, most often, refinancing is talked about. Specifically, it is established that people who have a mortgage loan should seriously consider refinancing it for several compelling reasons:
-To adjust the term of the aforementioned mortgage, either to increase it or to reduce it.
-To reduce the interest rate.
-To change what is a variable interest rate to a fixed one.
-To obtain what would be effective from the equity built in what is the house itself.
-To get a better variable rate, with much more suitable and favorable terms and terms.
However, experts in the field agree that, before requesting a refinancing, it is necessary to carefully analyze the situation. Therefore, you have to study well the moment, the mortgage credit you have, the moment the market is currently experiencing and, of course, do it in the hands of professionals and advisers who are trained and qualified in this regard.
Likewise, it is established that when you want to go to the bank to request a refinancing of the aforementioned loan, you must do so by providing both the reasons that lead to request it as well as a specific plan, in which it is clear how it is expected to face the payment and the objective that has been set about it.