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A refinance refers to the process of paying off an existing loan, with the proceeds from a new loan. Borrowers often seek to refinance in order to secure a lower interest rate or to lower a monthly payment. The most common refinance type is a mortgage refinance. In addition to lowering rates and/or the associated payment, a mortgage refinance often reduces the term of a loan and/or allows a borrower to switch between a variable and fixed rate. A refinance often consists of the same size loan, using the same property as collateral. In order to determine if a refinance is beneficial, the savings in interest must be compared to the fees associated with the refinance process. An example of a refinance fee is a prepayment fee. |
