Loan Refinance

Refinancing of interest only loans just means swapping one loan for anew one. It is an efficient way to lower the debt on current loans. This is specifically beneficial if the existing interest rates are lower than the interest percentage you are currently paying on the loan. Refinancing would allow you to alter your high interest debt into a low interest debt, as the amount of monthly payment would become lower.

The extra money saved can be spent in something more profitable such as real estate or stocks, or to settle high-interest debts like credit cards. Refinancing is also done for switching an adjustable rate credit into a fixed rate credit.

Refinancing has turned out to be very common in the past years that approximately three quarters of recent mortgages were refinanced loans in 2003.

Refinancing of interest only loans is very striking, especially when the period comes for the loan to get paid back. That means the loan will have to be paid off at the current interest rate, together with the principle. Most people look to refinance their interest only loan in order to buy more time, i.e. to delay the repayment of the principle further.

But, this may also raise the risk on the loan, because the interest rates may increase more, the cost of the house may come down or the economy may go down in the future.

Refinancing of interest only loans is suitable for individuals who are expecting big capital gains in the next coming years or are intending to market their house by the moment the interest-only period is over. This is a good alternative as long as the financial situation is good, the interest rates are steady and the prices of houses are rising. Interest only refinancing is ideal for individuals who have irregular incomes like commissions or bonuses or those who are anticipating an increase in their wages in the coming years. The savings accrued from refinancing may also be spent for home renovation, which will increase the price of the home in the coming years.

Jason Myers is a professional writer and he writes mostly about loan refinancing online. He’s also interested in lower mortgage offers.