Refinancing

Refinancing means paying off your existing mortgage with a brand-new loan on the same home. The new loan can have a different interest rate, a different term, a different lender — or all three.

Homeowners refinance for a few common reasons: to lower the interest rate (a rate-and-term refinance), to shorten the term and pay the loan off faster, to switch from an adjustable rate to a fixed rate, or to convert home equity into cash (a cash-out refinance).

Refinancing is not free: the new loan comes with its own closing costs, typically 2-6% of the loan amount. The key question is the break-even point — how many months of payment savings it takes to earn those costs back. If you plan to move before break-even, refinancing usually isn't worth it.

Estimate your own numbers with our refinance calculator, and see the guide When should you refinance your mortgage? for a full walkthrough.

Related terms: Closing Costs, Home Equity, Fixed-Rate Mortgage.

 
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