DEFINITION of 'Refi Bubble'

A period during which old debt obligations are being replaced with newer obligations with different terms. A typical refi bubble usually occurs when homeowners refinance their home mortgages because rates have fallen to an attractive level. Lowering interest costs or the interest rate leaves homeowners with more discretionary income.

BREAKING DOWN 'Refi Bubble'

On a personal level, smaller debts, like credit card debts or personal loans, can also be refinanced. A risk of refinancing may include a fee charged by financial institutions for early repayment of a loan, so it is important for those who are considering this option to compare the interest savings versus the fees charged for early payment.

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