What is Refinance?
A refinance is replacing your current mortgage with a new loan, usually to get a lower interest rate, change the term, or switch loan types. The new loan pays off the old one, and you start fresh with new terms. Refinancing has its own closing costs, so it pays off only if you keep the loan long enough to recoup them.
Example: A homeowner with a 7.5% rate refinances into a 6% loan, lowering their monthly payment, after confirming the savings will exceed the refinance closing costs within a couple of years.