An Introduction to Home Loan Refinances

Mortgage 101
If you've been thinking about refinancing your home loan, here are some things to consider:
Published on
August 18, 2023
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A home loan refinance is a way to take out a new mortgage and replace your existing one. You can use the money you get from refinancing to pay off other debts or to make repairs or renovations on your home. If you've been considering the idea of refinancing your home loan, here are some things to consider:

What Is a Home Loan Refinance?

A home loan refinance is when you take out a new loan to pay off an existing home loan. You can refinance for a number of reasons, including:

  • Lower monthly payments
  • A lower interest rate
  • A shorter term length (which means fewer years left on the loan)
When to Refinance Your Home Loan

The best time to refinance your loan is when you need to change the terms of your home loan. This includes:

  • Changing the interest rate on your home loan.
  • Shortening or extending the term of your home loan.
  • Lowering your monthly payment, or increasing it for a variety of reasons (e.g., if you want to pay off principal faster).
Why You Might Refinance Your Home Loan
  • You may want to lower your interest rate.
  • Your loan is probably at the maximum term allowed, and you'd like to extend it.
  • You want to pay off your loan sooner than expected.

If any of these sound like you, then refinancing may be right for you!

Understand the Costs of Refinancing

When you refinance your home loan, you will incur several costs. These include the origination fee, closing costs and prepaid interest.

The origination fee is a percentage of the loan amount that goes to your lender as compensation for providing financing for your loan. It may be expressed as a single dollar amount or as an interest rate; in both cases it is expressed as a percentage of your total mortgage balance at closing and payable in one lump sum upon closing.

Closing costs are fees paid to third parties involved in processing and completing your refinancing transaction such as attorneys and appraisers (these are not required but may be necessary depending on how much work needs to be done). You should expect these fees to range from 2%–3% of your original mortgage amount.

Work With an Experienced Mortgage Professional to Refinance Your Home Loan

To find a mortgage professional who can help you get the best deal on your home loan refinance, it's important to work with someone who is experienced, licensed and regulated. Here are some other things to look for:

  • A good reputation: When choosing a mortgage professional, do some research on the person or company that you're considering working with. Check their website and read their customer reviews on sites like Yelp or Angie's List. You should also ask your friends and family members if they have ever worked with them before, so that they can give you an honest opinion of their experience.
  • Licensed and regulated by federal agencies: Most mortgage professionals must be licensed before they can offer financial advice on mortgages or other types of loans. Look for companies that are registered with the Financial Industry Regulatory Authority (FINRA) as well as state-level regulators such as the Department of Consumer Affairs (DCA).
Do your homework before refinancing your home loan.

Before you start the process, do your homework. Research the market. Make sure to get a home loan pre-approval before applying for refinancing so that your new lender doesn't end up rejecting your application because you don't have enough equity in your home or because of other reasons like having too many loans on your credit report. Be aware that there may be costs involved in refinancing your mortgage, such as paying off any outstanding loan fees from the previous lender.


Refinancing your home loan can be a great way to save money on your mortgage. Just make sure you understand all the costs and risks before diving in!

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