What Does Refinance Mean?
1. When a business or person revises a payment schedule for repaying debt.
2. Replacing an older loan with a new loan offering better terms.
1. When a business or person revises a payment schedule for repaying debt.
2. Replacing an older loan with a new loan offering better terms.
explains Refinance
When a business refinances, it typically extends the maturity date. When individuals change their monthly payments or modify the rate of interest on their loans, it usually involves a penalty fee.
Refinancing Risk
What Does Refinancing Risk Mean?
1. The risk that an early unscheduled repayment of principal on mortgage-backed securities(MBS) will occur when the underlying mortgages are refinanced by borrowers. All MBS buyers assume some level of prepayments in their initial yield calculations, but an increase in the level of refinancing (which usually occurs as a result of falling interest rates) means that MBSs mature faster and will have to be reinvested at lower rates.
2. For a mortgage borrower, the risk that he or she will not be able to refinance an existing mortgage at a future date under favorable terms.
When a business refinances, it typically extends the maturity date. When individuals change their monthly payments or modify the rate of interest on their loans, it usually involves a penalty fee.
Refinancing Risk
What Does Refinancing Risk Mean?
1. The risk that an early unscheduled repayment of principal on mortgage-backed securities(MBS) will occur when the underlying mortgages are refinanced by borrowers. All MBS buyers assume some level of prepayments in their initial yield calculations, but an increase in the level of refinancing (which usually occurs as a result of falling interest rates) means that MBSs mature faster and will have to be reinvested at lower rates.
2. For a mortgage borrower, the risk that he or she will not be able to refinance an existing mortgage at a future date under favorable terms.
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