Among other reasons, a dip in interest rates is often considered an opportune moment for homeowners to entertain the option of refinancing. You can undertake the refinancing financial strategy by acquiring a new mortgage with more favourable terms to replace an existing one. Its significance is underscored by its potential to save money, improve financial stability, and contribute to wealth-building through strategic decision-making. 

By understanding factors like changes in market interest rates, improvements in credit score, or a shift in personal finances that can prompt you to refinance, you can make informed decisions aligned with your financial goals. Continue reading to get valuable insights into the dynamic aspect of homeownership and learn how you can benefit from refinancing your home loan.

When to Consider Refinancing 

It is crucial to keep an eye on the market's fluctuations in interest rates, as a decline could indicate a favourable time to consider refinancing. Regularly assess the prevailing interest rates and measure them against the terms of your original mortgage to identify potential savings through refinancing.

You must recognize the influence of an improved credit score on your ability to secure more favourable refinancing terms. A higher credit score often opens doors to better interest rates and loan options. 

Consider refinancing If your financial situation has improved due to increased income to secure better loan terms or to pay off your mortgage efficiently. Successfully reducing existing debts positively influences your overall financial profile. This improvement can create an opportunity for favourable refinancing terms and lower interest rates on your home loan.

Potential Benefits of Refinancing 

Refinancing your home loan can unlock several potential advantages. You can tailor your mortgage to better align with your financial goals. Securing a refinanced mortgage with lower interest rates can significantly reduce your monthly payments, easing your financial burden. 

A transition from a 30-year to a 15-year mortgage during refinancing can lead to a shorter loan term. This can lead to accelerated equity building and overall interest savings. While monthly payments may increase, homeowners can pay off their mortgage sooner.

By opting for cash-out refinancing, you can leverage the equity you have accumulated in your house. This option enables you to receive a lump sum of cash, which you can utilize for various purposes like debt consolidation, home improvements, or other financial goals. Increased equity can also fund renovations or upgrades with the potential for securing lower interest rates than alternate financing options.

Steps in the Refinancing Process

Refinancing a home loan involves several steps for a successful transition. Homeowners should start by assessing their financial goals. Reducing monthly payments, shortening the loan term, or accessing home equity can guide refinancing.

The next step is gathering the necessary documentation, including income verification, credit reports, and a property appraisal to determine the current market value and available equity. Homeowners should explore various lenders and loan offers to find the most favourable terms. This involves comparing interest rates, closing costs, and others that align with the financial goals.

Submitting the refinancing application involves identifying a suitable lender and loan offer. The lender evaluates creditworthiness, income, and property value. Solutions to potential hurdles like a lower-than-expected property appraisal can include providing extra documentation or exploring alternative lenders. 

Endnote

A thoughtful and informed approach to refinancing and a proactive attitude help homeowners make sound financial decisions that promote long-term financial stability. Regular evaluations assist them in making timely decisions that correspond to their changing objectives. A diligent navigation through the steps of the refinancing process guarantees that homeowners are well-prepared and informed throughout the refinancing process.

Nic Redfern, Finance Director at Know Your Money, offers Finance Monthly his advice for businesses ensure stable debt repayments.

It has been a hugely volatile year for UK businesses. The coronavirus pandemic has caused unprecedented economic turbulence, which continues to threaten many companies, as well as the job security of millions of employees.

Despite the Government putting in place substantial support packages to help businesses weather the storm, employers are still plagued with uncertainty. Indeed, 46% of businesses have seen demand for their services fall due to COVID-19, according to a recent survey of over 530 businesses conducted by KnowYourMoney.co.uk.

The research also showed that, with sales declining and cashflow issues rife, over a third (38%) of UK companies have taken on more debt in 2020. Of course, taking on debt can be beneficial to businesses – it can support growth or ensure survival – but failure to effectively plan for repayments can pose some serious problems in the future.

Unfortunately, planning for the future is hard at times like these. In fact, according to KnowYourMoney.co.uk’s study, over half (56%) of British businesses are struggling to make any long-term financial plans due to the uncertainty surrounding the pandemic. The fact a second lockdown has been announced since this survey was conducted will likely have made matters worse.

However, even amidst such disruption and uncertainty, there are steps that can be taken to help businesses get to grips with their debt repayments.

Take an inventory of the debt

Firstly, business leaders should make a note of all their debts. These will range from large repayments such as business loans and lines of credit, to smaller expenses, like business credit cards. This process will help employers understand which debts to confront first and where cuts can be (or need to be) made, thereby simplifying the repayment process.

Of course, taking on debt can be beneficial to businesses – it can support growth or ensure survival – but failure to effectively plan for repayments can pose some serious problems in the future.

In most cases, it is beneficial for businesses to prioritise repaying debts with the highest interest rates. This is because the longer it takes to pay off high-interest debts, the more a company will end up paying in the long term; tackling this debt early on will help to reduce long-term expenditure.

This exercise is particularly important for small and medium enterprise (SME) businesses, as they tend to face higher interest rates and shorter repayment timeframes. This is largely because UK SMEs' cash-to-debt ratio has been declining over recent years, meaning they find it harder to keep up with debt repayments. So, organising debts as early as possible will certainly help such smaller firms to avoid late payments, which could jeopardise their survival.

Choosing a debt reduction strategy 

Once the debt inventory has been completed, employers can look to develop a sustainable debt reduction strategy. The most basic form of debt reduction is the spartan approach. This involves the business limiting their spending to the bare necessities until the debt is repaid. However, this hard-line strategy might not give businesses the flexibility they require to run effectively.

Another popular option for businesses is to refinance debt. This typically means taking on a new loan in order to pay off existing debt. It can be a way of consolidating multiple debts into one manageable repayment, or to secure a lower interest rate. This is a particularly useful strategy for business owners with a good or excellent credit score. However, consolidating debt, even at a lower interest rate, can cost you more in the long term if you extend the term of your loan(s).

That said, refinancing a loan can come with complications; for example, some lenders may impose penalties on businesses who fully repay their debts earlier than agreed. Thus, employers should read the terms of existing loan agreements, before committing to this strategy.

Cutting costs  

Employers must also develop a sustainable budget and identify where savings can be made to finance repayments. This may seem like an obvious step, but some businesses may be unsure where to begin.

A good starting point would be to review which office equipment is not used as often as it could be; for example, laser printers or seldomly used office furniture. Employers could look to sell-off such expensive items. Additionally, they may consider purchasing second hand items in the future or shopping around for cheaper suppliers; it may not seem like a big step, but employers may be surprised by the savings they could make in their operational costs.

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Alternatively, businesses owners might consider moving to smaller premises where rent and utility costs would likely be cheaper. Indeed, moving to co-working spaces, or even making the move to permanent remote working could present scope to make further savings.

Of course, no two businesses are the same and certain cost-cutting measures will suit some more than others. So, employers should take their time when assessing their outgoings to understand which cuts, they can make without endangering the business.

Seek advice when needed 

These are trying times for businesses everywhere – even for some of the largest and best-prepared of corporations – and, at times, getting the organisation’s finances in order might seem like an insurmountable challenge. In many cases, therefore, I would recommend that business owners seek further advice.

Depending on the needs of the particular organisation, owners might look to business consultants, accountants, specialised credit counsellors or financial planners for some more focused assistance. These experts are able to assess all elements of an organisation and develop a tailored strategy to suit the businesses specific needs. Especially during difficult economic periods when businesses might seek to pool their resources, this can be a great source of help when navigating debt.

All in all, business owners should remember that they do not have to weather the storm alone. With sound advice and perseverance, companies should be able to lessen their financial burdens, and find a workable and personalised repayment strategy.

The multi-jurisdictional transaction in Slovenia, Croatia and Serbia was divided into two main stages and structured as refinancing of an existing syndicated debt by three separate syndicated facilities agreements based on Loan Market Association standards.

Šelih & partnerji assisted Don Don as the borrower as well as one of its shareholders - KJK Fund II. ODI represented AIK Banka and Societe Generale's Slovenian entities on the lending side.

Mia Kalaš, Partner and Head of the firm’s Banking & Finance practice, led the transaction within Šelih & partnerji Law Firm, with the assistance of Senior Associate Nika Bosnič.

The ODI team included Partner Suzana Boncina Jamsek and Senior Associate Masa Drkusic in Slovenia, Partner Branko Ilic in Croatia and Partners Tamara Curovic and Milos Curovic in Serbia.

Domino's Pizza recently announced that certain of its subsidiaries intend to complete a recapitalization transaction, which will include the refinancing of a portion of their outstanding securitization debt with a new series of securitized debt.

• The Company's last recapitalization occurred in October 2015 (the "2015 Recapitalization"), with the issuance of a $1.425 billion securitized financing facility consisting of $1.3 billion of fixed rate notes and $125 million of variable funding notes (the "2015 VFN Notes") that replaced the 2012 VFN Notes (defined below).
• The Company's prior recapitalization before the 2015 Recapitalization occurred in March 2012 with the issuance of a $1.675 billion securitized financing facility consisting of $1.575 billion of fixed rate notes (the "2012 Notes") and $100 million of variable funding notes (the "2012 VFN Notes").  At the end of the first fiscal quarter of 2017, there was approximately $910 million in outstanding principal amount of the 2012 Notes.
• The Company's subsidiaries intend to issue approximately $1.8 billion of new securitized notes (the "2017 Notes") and to use the proceeds to prepay and retire the outstanding 2012 Notes at par, to pay transaction fees and for general corporate purposes.
• The Company also expects to enter into a new $175 million variable funding note facility, which will replace the 2015 VFN Notes facility.

The consummation of the offering is subject to market and other conditions and is anticipated to close in the third quarter of 2017. However, there can be no assurance that we will be able to successfully complete the refinancing transaction on the terms described or at all.

(Source: Domino's Pizza, Inc.)