Refinancing it 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 (solve an expense, grant the capital needed for something). That verb, in turn, can establish that it derives from the French "financer", which can be translated as "defray a debt" and emanates from Latin, specifically, from "finis", which is synonymous with "end."
Knowing the meaning of financing and financing, and from the inclusion of prefix re- , we can affirm that refinancing consists of refinance . The notion is usually 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 repayment of the credit to the real income of those who must pay the debt so that it is not unpayable.
The debtor, therefore, requests a refinance when he needs to pay less in each installment or when he wishes to cut the interest he will pay at the end of the credit . For the creditor, accepting 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 secure that income and not that the debtor stops paying.
In some cases, refinancing even includes a Grace period in which the debtor has no obligation to pay the debt fee, so that he can order his finance or generate resources.
In the area of mortgages it is where, more frequently, there is talk of refinancing. Specifically, it is established that people who have a mortgage loan must 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 from 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 achieve a better variable rate, with terms and terms much more adequate and favorable.
However, experts in the field agree that, before requesting a refinance, it is necessary to analyze the situation well. Therefore, you have to study the moment, the credit of the mortgage you have, the moment that the market is now living and, of course, do it from the hands of professionals and advisors 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 credit, you must do so by providing both the reasons that lead to request it and also a concrete plan, in which it is clear how it is expected to deal with the payment and the objective that has been fixed in this regard.