What is Refinancing?

Refinancing is the process of paying off an existing loan with the proceeds from a new loan, usually of the same size, and using the same property as collateral. Refinancing can be beneficial if the savings in interest and/or reduced monthly payment outweigh the cost to do it. Other reasons to refinance include reducing the term of a longer mortgage, or switching between a fixed-rate and an adjustable-rate mortgage. Some mortgages have prepayment penalties, making refinancing less favorable because of the increased cost to the borrower at the time of the refinancing.


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