Mortgage Refinance Definition

A mortgage refinance is the process of replacing an existing mortgage obligation with a new mortgage obligation bearing new terms. Almost always, mortgage refinancing involves either the salvage of a distressed mortgage, a decrease in the mortgage interest rate, or a decrease in the equity remaining in the mortgaged property.

Mortgage refinancing is enabled through the call provisions contained in almost all mortgages, allowing the debt to be paid in full before the full term of amortization. Mortgage refinancing typically involves most or all of the same processes of a new mortgage, as well as most of the costs associated with originating a mortgage. Nevertheless, if the interest rate can be reduced by 1.5% or more, refinancing will save the homeowner money.