Replacing an existing loan with a new one, usually to lower the rate, change the term, or pull out cash.
A refinance makes sense when the monthly savings repay the closing costs before you sell or refinance again — the break-even test. Cash-out refis trade equity for liquidity.
Example: Dropping from 7.25% to 6.125% on $350,000 saves ~$260/month; $6,000 costs break even in ~23 months.
FAQ
What is Refinance in simple terms?
A refinance makes sense when the monthly savings repay the closing costs before you sell or refinance again — the break-even test. Cash-out refis trade equity for liquidity.