Tuesday, April 4, 2006

What's In A Word? Defining Home Refinancing

Many a homeowner has been completely stumped by exactly what home refinancing perports to be and how interest rates figure into the process. This is especially so when we consider the need to lock in rates while waiting for the loan to fund.

The Fed has gone to great lengths to revise the definition of refinancing in order to produce more accurate reporting of loans.

Let's take the time to define home refinancing using a number of dictionary and see what light is shed by definition.

If the loan/application is to satisfy and replace an existing loanand both the old and new loan/application is secured by a lien on a dwelling it must be reported as a refinancing.

Therefore a refinancing is a new home purchase loan that satisfies and replaces an existing loan by the same borrower, in which the existing loan is a home purchase loan, and both the existing and the new loan are secured by first liens on dwellings.

Tips: Home refinancing can reduce current interest rates on the mortgage and lower monthly payments while providing cash to fund other projects for or apart from the home.