What is Refinancing?
Refinancing is a great way to take advantage of historically low rates and get rid of debt. Learn tips and tricks on how to refinance your mortgage and whether it’s right for you. The primary benefits that refinancing offers are the opportunity to: save money by paying less in interest, consolidate debt into one convenient payment, or access cash from an equity line or home equity loan without having to sell your home. In addition, when you refinance a mortgage, the interest rate you receive will be much lower than if you had been able to purchase a new home today.
A refinance can be done for many reasons, but the most common are that you are looking to get out of debt, you want to get a lower interest rate on your mortgage, or you want to take out a home equity loan. Home equity loans allow you to borrow money against the value of your property so you can invest in something else or pay off other debts. You should also consider refinancing for any reason because it helps homeowners save money over the entire life of the loan if they are able to get a lower interest rate on their loans.r mortgage brokers so it is important to look into certification before doing any business.
Is Refinancing Risky?
Refinancing comes with two major risks:
1) losing money on your current mortgage and
2) losing equity in your home in the event of a foreclosure. high interest rate mortgage, refinancing could mean significant savings.
Refinancing in Businesses
It’s not just homeowners who are refinancing these days. Businesses are also hopping on the bandwagon in order to take advantage of rates that are still near historical lows, and to release equity in their business.
Refinancing your business can be broken down into two types; refinancing the business itself, or refinancing the real estate that the business exists in. The first is very similar to how you’d refinance your home, while the second requires additional paperwork (and expense) because you are dealing with both real property and commercial interests.
When refinancing the business itself, you will need to check your state laws and also see if there are any industry specific rules that will apply. These could include how you treat the loan as equity (when seeking bank financing) or which personal assets can be attached to it (if the business fails).
If you own real estate that your business is located in, you will have to deal with both a personal and a commercial loan. For a small business owner operating as a sole-proprietorship, these two loans are usually bundled together. However, for a corporation or partnership that owns the property, the real estate and business loans should be separate.
When refinancing the real estate, you will simply need to use traditional means such as getting a new mortgage or refinancing your existing home loan. When refinancing your business you will need to look at both traditional and non-traditional sources.
Pros and Cons of Refinancing Business Debt
The pros: Refinancing your business can be a smart move if it reduces both interest and principal amounts on loans currently owed by the company. This can quickly save tens of thousands of dollars over time, and can be an effective use of any spare cash you may have available.
The cons: Refinancing can also be a bad move if it relocates your business to a higher rate. With that said, there are often other benefits to refinancing that outweigh this potential drawback.
What about Online Businesses?
Online businesses generally do not use traditional bank financing sources like commercial banks, credit unions and SBA loans, so they should not be concerned about access to these sources when refinancing. However, they should be aware of the fees charged by online lenders.
Online business owners should make sure to do a thorough investigation of the available loans and make a choice based on which is going to save their company more money. They should also keep in mind that high interest rates might not necessarily be indicative of a failing business. Often, very high interest rates are an indication of a rushed decision or poor planning on the part of the business owner.
Refinancing business debt is similar to refinancing your home if you own a small or online business. It can be done through refinance loans, lines of credit or other types of financing that are available for residential use. Online businesses should always investigate all options before committing to refinancing any commercial property they own. The decision to refinance a loan whether personal or business should be backed by sound legal and financial evidence of the accruing benefit of such refinancing option. Choosing to refinance without adequate information could leave the business worse off than it was at best and threaten the continuation of the business as a going concern at worse. This is why it is advised that business managers engage the services of expert Debt Financing Consultants from Fintalent the hiring and collaboration platform for tier-1 Strategy and M&A professionals, to get sound financial advice.