Definition

Refinancing pays off your current mortgage with a new loan, typically to secure a lower interest rate, shorten the term, or tap home equity. Because it involves closing costs, the key question is the break-even point — how many months of payment savings it takes to recover those costs. It pays off only if you keep the loan past that point.

1. When Does It Make Sense to Refinance Your Mortgage?

   Refinancing can save thousands over the life of a mortgage — or cost more than it saves if you do it at the wrong time. Here is how to calculate whether refinancing makes sense for your situation.
   real estate

1. Closing Costs

   The fees paid to finalize a home purchase or refinance, on top of the down payment.
2. Fixed-Rate Mortgage

   A mortgage whose interest rate stays the same for the life of the loan.
3. Home Equity

   The portion of your home you truly own — its value minus what you still owe.