Guide
Refinance Basics
Nov 29, 20255–7 min read
Refinancing a mortgage means replacing your current home loan with a new one, usually to lower your interest rate, reduce your monthly payment, or change the type of loan.
Key takeaway
Refinancing can be a useful tool to improve your monthly payment or pay off your home faster, but it only makes sense if the long-term savings are greater than the total costs of getting the new loan.
Key concepts
- Interest rate: the cost you pay to borrow money.
- Loan term: how many years you will pay the loan (for example 15 or 30 years).
- Closing costs: fees that you pay when the new loan is created.
- Break-even point: how long it takes for your monthly savings to cover the closing costs.
When refinancing might make sense
- When interest rates are significantly lower than your current rate.
- When you want to move from an adjustable-rate to a fixed-rate mortgage.
- When you want to shorten the term of your loan to pay it off faster.
Before you refinance: quick checklist
- Check your credit score and correct any obvious errors.
- Compare offers from at least two or three lenders.
- Calculate your break-even point using closing costs and monthly savings.
- Make sure you understand if there are prepayment penalties on your current loan.
Important note
Educational use only. This guide is not legal, tax, or financial advice for any specific case. Always review your situation with a licensed professional before making decisions about your mortgage.