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Refinancing: Interest
built 619 days ago
Refinancing can be worthwhile, but it does not necessarily make solid financial sense for everyone. There are a number of things that must be considered, such as how long you intend to stay in the home after the refinance. Most sources agree that it takes about three years to recoup the costs associated with procuring the refinancing and begin to realize the savings from the lower interest rate.
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Companies may offer streamlined refinancing in more than one way. Some companies prefer the no cost refinancing method, where there are no out-of-pocket costs for the borrower. This method of refinancing charges a higher rate of interest in exchange for not requiring the borrower to finance or pay the closing costs in cash. The higher rate allows the company to recoup the closing costs associated with the refinancing transaction.
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In most refinancing situations, the borrower does so mainly to reduce the interest cost and replace it with a new lower rate. Before you jump into refinancing, you must determine whether the new loan option will ultimately save you money.
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Effective yesterday, the Company completed the refinancing of its subordinated notes totaling $23 million with lower cost, variable interest rate, senior-secured financing with commercial banks with whom the Company has existing relationships. The second quarter results will include the write off of approximately $1.8 million in debt origination costs and note discount related to the subordinated debt, as well as a $1.4 million prepayment penalty. For the first quarter of 2005, the effective interest rate on the subordinated debt, including amortization of debt origination costs and note discount, was 16.2%. The current blended interest rate on the newly financed senior-secured financing, including amortization of origination costs, is 6.8%.
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[One] trigger for corporate debt refinancing is when the price of their common stock reaches a level which makes it attractive for a firm to replace its outstanding debt with equity. Aside from reducing interest costs, this latter move gives a firm additional flexibility for future financing; by retiring debt, the firm will have some unused debt capacity. Regardless of the reason for the refinancing, the issuer has to deal with two decisions: 1) Is the time right to refinance, and 2) What type of security should be issued to replace the one being refinanced?
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Continuing a trend of property owners to leverage the current low interest rate environment, PNC MultiFamily Capital ... secured FHA-insured refinancing for two additional multifamily properties. By substantially reducing the loan interest rates over the lifetime of a loan, owners can decrease their annual debt service, increase the asset value and provide funds for property improvements.
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