Refinancing a mortgage means replacing your existing mortgage with a new one, usually with different terms, such as a different interest rate, term length, or type of loan. The new mortgage pays off the balance of your old mortgage, and you start making payments on the new loan.
The main reasons people refinance their mortgages are to save money on interest, reduce their monthly payments, or pay off their mortgage more quickly. Refinancing can also help borrowers switch from an adjustable-rate mortgage to a fixed-rate mortgage or to tap into their home equity for cash.
Refinancing can be a good option if you can secure a lower interest rate or better terms than your existing mortgage, but it’s important to carefully consider the costs and benefits of refinancing before making a decision. Refinancing typically involves closing costs and fees, and it can extend the length of your loan, potentially increasing the total amount of interest you pay over the life of the loan.