Refinancing

Refinancing means paying off your current mortgage with a new one, ideally on better terms. The most common reason is a lower interest rate, which reduces your monthly payment and the total interest you pay. Homeowners also refinance to shorten the term, switch from an adjustable to a fixed rate, or pull out cash against their equity in a cash-out refinance.

The catch is cost. A refinance carries closing costs, often a few thousand dollars, so the savings only pay off if you keep the loan past the break-even point, where cumulative monthly savings exceed those upfront costs. Refinancing also resets the amortization clock, so stretching a loan back out to 30 years can lower the payment while raising lifetime interest. Our extra payments versus biweekly playbook and guide to mortgage amortization cover when paying down or refinancing makes the most sense.