How does refinancing work?
When you refinance your mortgage, you take out a new loan, and the funds from the new mortgage are used to pay off your existing loan. Your new mortgage will come with new terms, including the interest rate. If you can secure a lower rate than your previous mortgage, you can potentially save thousands of dollars over the life of your loan.
There are plenty of reasons to refinance your mortgage:
- Save on mortgage interest over the life of the loan
- Reduce your mortgage payments
- Shorten the term length of your mortgage
- Swap your adjustable-rate for a fixed-rate mortgage, or vice versa
- Get rid of private mortgage insurance (PMI) premiums
- Cash out some of your home equity