What is refinancing?

Loan refinancing means that a borrower transfers his loan obligations to a new lender under their proposed terms. The goal is to receive more favorable loan conditions and reduce total costs in the long-term.

When is refinancing the right choice?

Usually, the decision to refinance a mortgage loan is made if another lender can offer more favorable loan terms. This decision can be reasonable; however, the potential benefit must be calculated. Refinancing is a fee service, so make sure your gains are larger than losses.
There may be other situations when loan refinancing is the right choice. Usually, this refers to smaller loans, like consumer loans or leasing agreements. For example, if you have taken multiple loans with different lenders, consolidation with one lender is a logical solution.
Refinancing definitely is the right choice if you have some problems with the lender – they want to adjust the loan terms for no reason, increase the interest rate or ask for an inadequately high commission fee for adjusting loan terms.

Take into consideration that the process of refinancing is very similar to the process of applying for a new loan. Therefore, your income and credit history will be taken into consideration. Remember that the decision to refinance a loan has to be thought through. It is recommended that you try finding a compromise with the existing lender first to avoid extra costs.