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What is mortgage refinancing?

Andrew Goldman

Andrew Goldman has been writing for over 20 years and investing for the past 10 years. He currently writes about personal finance and investing for Wealthsimple. Andrew's past work has been published in The New York Times Magazine, Bloomberg Businessweek, New York Magazine and Wired. Television appearances include NBC's Today show as well as Fox News. Andrew holds a Bachelor of Arts (English) from the University of Texas. He and his wife Robin live in Westport, Connecticut with their two boys and a Bedlington terrier. In his spare time, he hosts “The Originals" podcast.

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.

Last Updated November 7, 2018

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