Paying off an existingloanwith theproceedsfrom a new loan, usually of the samesize, and using the samepropertyascollateral. Inorderto decide whether this is worthwhile, thesavingsininterestmust be weighed against thefeesassociated with refinancing. The difficult part of this calculation is predicting how much the up-frontmoneywould beworthwhen the savings are received. Other reasons to refinance include reducing the term of a longermortgage, orswitchingbetween afixed-rateand anadjustable-ratemortgage. If there areprepaymentfees attached to the existing mortgage, refinancing becomes less favorable because of the increasedcostto theborrowerat the time of the refinancing.
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