By refinancing your mortgage, you replace your current mortgage with a new mortgage that has different terms. The new mortgage might be a different type (fixed-rate or variable), have a shorter or longer loan term and/or amortization period, a different interest rate (lower or higher) and a different payment amount and frequency.
Typically, the benefit of refinancing your mortgage is to leverage the equity you’ve built up in your home to access extra money. You might use the extra money for a home repair or planned renovation. Alternatively, you can use the money to consolidate debt – when you do this, you eliminate multiple bill payments and only have to focus on paying back your mortgage.
Mortgage refinancing works similar to applying for a first mortgage. Your lender will review your credit history, income, value of your home and more to assess your level of risk and determine the interest rate and mortgage amount.