Definition
The process of replacing an existing mortgage with a new one, typically to secure a lower interest rate, change the loan term, switch from an ARM to a fixed rate, or access home equity (cash-out refinance). Refinancing involves closing costs of 2-5% of the loan amount. A general rule is that refinancing makes sense when rates drop at least 0.5-0.75% below your current rate.
Related Mortgage Terms
- Closing Costs
Fees and expenses paid at the finalization of a real estate transaction, typical...
- Equity
The difference between your home's current market value and the remaining mortga...
- Interest Rate
The cost of borrowing money, expressed as a percentage of the loan amount charge...
- Amortization
The process of paying off a mortgage through regular monthly payments of princip...
- Annual Percentage Rate (APR)
The total annual cost of a mortgage expressed as a percentage, including the int...
Understanding mortgage terminology helps you compare loan offers and make informed decisions. Use our mortgage calculator to see how these terms affect your monthly payment.