Financing refers to any process by which capital is raised. A very broad term, financing can be necessary for a multitude of reasons and for many different types of entities, but most people encounter the need for financing at least once in their lifetimes.
Financing for a home
Few people have the ability to purchase a piece of real estate with cash, so the vast majority of Americans buy and move into their first home with a mortgage loan, paying off the principal amount over time. Mortgage loans are a type of financing, since the need for a loan that covers the price of the property is present and met, usually by a bank or other financial institution that provides the loan. Refinancing is also related to this type of financing, and occurs when the equity that has built up in the property is taken out for cash and a different loan then taken out, often to take advantage of lower interest rates. Owner financing is a process by which money is borrowed from the current owner of the property by the prospective buyer, either in place of or in addition to traditional bank financing.
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By Kira Lee
