Understanding Mortgage Refinancing

Refinancing a mortgage involves paying off an existing loan and acquiring a new one with a lower interest rate. This process is possible because the American mortgage system allows homeowners to take advantage of drops in interest rates by transferring their loan to a new lender. A key aspect is assessing whether the savings from a lower rate will outweigh the costs associated with refinancing, such as closing costs, which can amount to several thousand dollars. This decision often includes calculating the break-even point to determine how long one must stay in the home for the savings to justify the refinancing costs.