Refinancing, an extension or increase to existing debt, is the financial term for the action of paying off an existing loan by taking out a new loan and using the same property as security.
There are several reasons to consider refinancing. Homeowners may choose to refinance to reduce their mortgage expense if interest rates have dropped (or they have found a better deal), to move from an adjustable to a fixed rate loan if rates are rising, or to take a cash-out refinancing (which involves much higher interest rates) to consolidate existing debt or to invest the cash in improvements that will increase your home’s value.
When closing, there are fees attached: closing costs are generally comparable to those for any mortgage. If you're considering refinancing to reduce your payments, you should first calculate how long it will take before you make up for the closing costs and begin to save money again.