Refinancing a mortgage is when a homeowner takes out a new mortgage to pay off an existing mortgage.

Homeowners refinance their mortgages for a variety of reasons; to secure more favorable terms like a lower or fixed rate, or to cash out equity for improving their property, consolidating debt, or paying for big ticket items like a college education or medical procedure. Homeowners should consider refinancing if their financial situation or credit profile is changing. For example, those considering retirement might want to make their planning easier by securing a fixed rate loan. Homeowners who are starting a family might prefer to guarantee a lower payment for a few years. Entrepreneurs founding new businesses might want to pull some capital out of their homes first, and sub-prime borrowers who have improved their credit should see if they have earned an improved rate.

Before entering into a mortgage refinance loan, homeowners typically use one of many online mortgage calculators, which are tools that help determine which available loan option is the best, and if the costs of refinancing are justified by the savings derived from changing the terms of their loans. By contacting several lenders and comparing their programs, borrowers can best determine which available mortgage refinance offers the most advantageous rate and terms.