Refinance
A refinance replaces your existing mortgage with a new loan, typically to secure a lower interest rate, change the loan term, switch loan types, or access equity through a cash-out option.
There are two main types: rate-and-term refinances (which adjust the rate or term without pulling cash out) and cash-out refinances (which increase the loan amount and pay the difference to the borrower). Each serves a different strategic purpose.
Refinancing is not free. It involves closing costs similar to those on a purchase loan. The key question is whether the long-term savings justify the upfront cost — which is where a breakeven analysis becomes essential. See our guide on whether now is a good time to refinance.
Why This Matters: A well-timed refinance can save you tens of thousands over the life of your loan. A poorly timed one can cost you more than it saves. Having a loan officer who runs the numbers honestly — and tells you when not to refinance — is invaluable.
Common question
When does refinancing make sense?
When the savings from a lower rate or better terms outweigh the closing costs within a time frame you are comfortable with. A breakeven analysis helps — if you plan to move soon, refinancing may not pay off.
What is the difference between rate-and-term and cash-out refinance?
Rate-and-term changes your rate or term without pulling cash out. Cash-out refinance increases the loan amount and gives you the difference in cash. Each has different uses and guidelines.
Related Topics
Related Mortgage Terms
Thinking about refinancing? Let us run the numbers and see if it makes sense for your situation.
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