Definition of refinance
Refinance or refinancing is the process of acquiring a new mortgage to pay off the balance of an existing mortgage. Typically the new mortgage comes with better terms and condition. Also called as Refi.
Refinancing is considered when there is a lower interest rate offer, borrower’s will to shorten or lengthen repayment period, reduced monthly payments, cash-out refinance, reduce or stop private mortgage insurance (PMI), opportunity to convert Adjustable rate mortgage (ARM) to Fixed rate mortgage etc.
Refinance comes with some cost, generally include cost of new loan, closing cost of existing loan, home appraisal fee, application fee, title search, credit report fee, discount points, and the loan origination fee.
Refinancing can be a good financial decision, but before making decision calculate the long-term effect as well. Otherwise, it could lead you to pay more in interest until full repayment than with your original mortgage.