Mortgage refinance
What is mortgage refinance?
A mortgage refinance replaces your existing home loan with a new one, usually to change the interest rate, the loan term, or both. The old loan is paid off in full at closing.
What it means in practice
Refinancing is not a modification of your current loan. It is a brand-new mortgage that pays the old one off, which means a new application, a new closing, and a new set of closing costs.
The two common forms are a rate-and-term refinance, which changes the pricing and payoff schedule but not the amount owed, and a cash-out refinance, which increases the balance so you can take equity as cash.
Because a refinance replaces the whole balance, the new rate applies to everything you owe. If your existing rate is well below current market rates, refinancing re-prices the entire loan, not just the portion you care about.