Q

What is mortgage refinancing?

A

It's the process of convincing a lender to pay off your current mortgage and replacing it with a brand new one.

Mortgage refinancing is the process of convincing a lender to pay off your current mortgage and replacing it with a brand new one that, unless you’re really bad at refinancing, will save you money or alter the terms of the loan in ways that will benefit you.

Under what circumstances might you do such a thing? Mortgage interest rates generally rise in times of positive economic news, which are of course also periods when lots of people buy houses, so many people will find themselves in houses paying mortgages with too high interest rates. Those homeowners may want to take advantage of available savings when interest rates fall. Since any new mortgage will come with a host of fees that will usually hit four figures, it only makes sense to refinance if you’re going to be in the house long enough for your savings to outweigh the costs of refinancing; calculators that will run the numbers aren’t hard to find.

Other reasons for refinancing might include a desire to convert a variable rate mortgage into a fixed rate one, to change the length of the loan term to pay less per month for a longer period, or to pay more per month to pay off the loan more quickly. Or perhaps you just have a burning desire to sit in a room under fluorescent lights and sign your name 35 times. If any of these situations apply to you, consider refinancing.

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