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Glossary Finance

Refinancing

Refinancing is replacing an existing loan with a new one, usually to get a lower rate, a different term or to take out equity.

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In more detail

The new loan pays off the old one, but it brings closing costs. Divide those costs by the monthly saving to find the break-even point: $3,000 of costs and a $125 monthly saving break even after 24 months, so it pays off only if you keep the loan longer than that. Restarting a 30-year term can raise total interest even with a lower rate.

Try these tools

Refinance Calculator

Compare your existing loan against a refinanced loan to evaluate monthly payment reductions or lifetime savings.

Mortgage Calculator

The Mortgage Calculator helps estimate the monthly payment due along with other financial costs associated with mortgages.

See also

  • Glossary Amortization
    Amortization is paying off a debt through regular instalments that each cover interest plus part of the principal.
  • Glossary Loan-to-value ratio (LTV)
    The loan-to-value ratio (LTV) is the loan amount divided by the value of the asset securing it, a key measure of lender risk.
  • Glossary APR
    APR (annual percentage rate) is the yearly cost of borrowing, expressed as a percentage, that includes the interest rate plus certain fees.
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