Loans & Credit

What Is Refinancing?

Refinancing means replacing an existing loan with a new loan, usually with a different interest rate, term, or type. The new loan pays off the old one. People refinance mortgages, auto loans, and student loans, often to change the monthly payment or the total interest cost.

How Refinancing Works

The borrower applies for a new loan, which is used to repay the old balance. The new loan has its own rate, term, and fees. Closing costs or fees can offset some or all of the savings from a lower rate.

Break-Even on Refinancing

A common way to evaluate a refinance is the break-even point: total refinancing costs ÷ monthly savings = number of months before the savings cover the costs.

Term Changes

Extending the term can lower the monthly payment but increase total interest; shortening it usually does the opposite.

🧮 Calculate It Yourself

Put Refinancing into practice with these free calculators — no sign-up, nothing stored.

🏠 Mortgage Calculator Estimate your monthly mortgage payment including taxes, insurance, and PMI. Calculate → 📅 Amortization Schedule Calculator See your full year-by-year loan breakdown and what an extra payment saves. Calculate → 🎓 Student Loan Payoff Calculator See your payoff timeline and what an extra payment saves you. Calculate →

🔗 Related Terms

Loan Term Closing Costs Interest Rate Mortgage Break-Even Point

More Loans & Credit Terms

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.