QandAs: Loans

What is a Refi?

Answer:
Most fields have their jargon, and the field of real estate and mortgage banking

is no different. You may have heard the word “refi” quite a lot lately, with everything going on in the housing industry. “Refi” is simply an abbreviation of either the word “refinance” or “refinancing.”

Someone looking for a refi is someone who already has at least one mortgage. This homeowner is looking for a new mortgage to pay off the old one. Although this may sound pointless, since you’re still left with a mortgage, there are many reasons to look for a refi and many different ways to refinance.

The most common type of refi is a straight refi. As you may have guessed from the name, this means that the person borrowing the money is only borrowing what is owed on the current mortgage, not any extra. This is often done if the new mortgage has a better interest rate or the monthly payments are lower with the refi.

A cash-out refi is another popular type of refi. This type of refinancing gives the borrower the ability to actually borrow more money than the house is worth. There are usually limits on cash-out refinancing. This type of refi is common when the borrower needs the extra money for something else, such as tuition, home improvements, or medical bills.