What is mortgage refinancing and when should I consider it?

Refinancing replaces your existing mortgage with a new loan, typically to obtain a lower interest rate, reduce your monthly payment, shorten your loan term, or access home equity. A rate-and-term refinance changes your rate or term without taking cash out. A cash-out refinance lets you borrow more than you owe and receive the difference as cash. The general rule of thumb is refinancing is worth considering if you can lower your rate by at least 0.75% to 1% and plan to stay in the home long enough to recoup the closing costs. Use a break-even calculator to determine if refinancing makes financial sense.