Mortgage Dictionary
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Refinancing
Refinancing refers to paying off an existing loan
with the proceeds from a new loan, using the same property as
collateral.
Some common reasons to refinance include the following:
- Lower total lifetime interest expense.
- Reduce monthly mortgage.
- Pay off the mortgage sooner.
- Take cash out of home equity.
-
Switch from an unpredictable
ARM
to a predictable
fixed-rate mortgage
.
Given the benefits of refinancing, why not refinance? Sadly, refinancing
is not free. Settlement costs can amount to thousands of dollars.
In order to decide whether to refinance, the benefits
of refinancing must be weighed against the costs of
refinancing. To see how to evaluate refinancing costs and benefits, read the
refinancing case study.