refinance

verb re·fi·nance \ ˌrē-fə-ˈnan(t)s , (ˌ)rē-ˈfī-ˌnan(t)s , ˌrē-(ˌ)fī-ˈnan(t)s \
|Updated on: 10 Aug 2018

Definition of refinance

refinanced; refinancing; refinances
transitive + intransitive
: to renew or reorganize the financing of something : to provide for (an outstanding indebtedness) by making or obtaining another loan or a larger loan on fresh terms
  • refinance a mortgage
  • With rates tumbling, pay a little more now and retain the flexibility to refinance again next year.
  • —Daniel Kadlec

Recent Examples of refinance from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'refinance.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

First Known Use of refinance

1995

in the meaning defined above

See Words from the same year
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Financial Definition of REFINANCE

refinance

What It Is

Refinance refers to the replacement of a debt with new debt bearing different terms.

How It Works

Financing involves borrowing a specific amount of money over a length of time at an agreed-upon interest rate.  Payments on the debt are divided between interest and principal.  If circumstances change, for example, the length of time needed to repay the debt is longer and the lender agrees, the loan may be refinanced, extending the term and lowering the period payments (because they are extended over a longer period of time.)  If interest rates change, the debt may be refinanced using a lower interest rate.

For example, the $150,000 loan below is shown with a term of 15 years at 8% per year.  By year 5, the market interest rate drops to 5%.  When the loan is refinanced over the balance of the term, for example, the savings in principal and interest payments on the loan will be over 32,000.

Refinancing may also convert an adjustable rate mortgage to a fix rate mortgage, reducing the interest rate risk to the borrower.

Why It Matters

Refinancing may be restricted on debts containing "call provisions," requiring a penalty payment in the event of a refinancing. In addition, a refinancing usually requires a closing and transaction fee that may be expensive. As a result, it is important to calculate the present value (the value in today's dollars) of the savings and compare it to the closing costs of the refinancing.


REFINANCE Defined for English Language Learners

refinance

Definition of refinance for English Language Learners

  • : to get a new loan to pay (an older debt) : to finance (something) again


Law Dictionary

1

refinance

transitive verb re·fi·nance \ ˌrē-fə-ˈnans, -ˈfī-ˌnans \

legal Definition of refinance

1 : to renew or reorganize the financing of
2 : to revise the terms of (a debt obligation) especially in regard to interest rate or payment schedule
  • refinance a mortgage
: to finance something anew

2

refinance

noun

legal Definition of refinance

: a financing of something anew; especially : a revision of the terms of a debt obligation (as a mortgage)


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