Refinance
Refinancing · RefiA refinance replaces an existing mortgage with a new loan that pays it off, at a new rate, a new term or both. The new loan has its own closing costs, and its payment is set by amortizing the balance at the new rate over the new term.
What is a refinance?
Under Regulation Z a refinancing is an existing obligation satisfied and replaced by a new one taken on by the same borrower, with a new set of disclosures. A rate-and-term refinance keeps the balance about the same and changes the rate or the term. A cash-out refinance borrows more than is owed and pays the difference to the borrower, which raises the balance.
The term is the part people miss. A refinance into a fresh 30 years lowers the payment twice, once through the rate and once by stretching the balance over more months, and the second part adds interest rather than removing it.
A refinance is not a recast. A recast keeps the loan and the rate and only recomputes the payment after a lump sum.
How a refinance works, with numbers
A loan has $280,000 left, 300 payments to go at 6%, and a payment of $1,804. Refinanced at 5% over the same 300 months, the payment is $1,637, a difference of $167 a month. With $6,000 of closing costs, the difference covers the costs after about 36 months: the break-even.
Refinanced instead into a fresh 30-year term at 5%, the payment falls further, to $1,503, but 360 of them come to $541,116, about what the 300 remaining payments on the old loan would have cost.
- Balance refinanced
- $280,000
- Payment at 6%, 300 months
- $1,804
- Payment at 5%, 300 months
- − $1,637
- Monthly difference
- $167
- Closing costs ÷ difference
- $6,000 ÷ $167
- Break-even
- 36 months
Why a refinance matters
The rate sets the interest on every remaining payment, so a refinance changes the total cost of the loan, the payment and the payoff date at once. The closing costs are paid up front, or rolled into the balance, and the break-even is the month the monthly difference has repaid them.
A refinance also replaces whatever the old note scheduled next. On an adjustable-rate mortgage, the coming rate reset goes away with the old loan.
Refinance in Taiga Finance
The mortgage payoff planner in Taiga Finance has a “Refinance” block with two fields, “New rate” and “On”, the date. Adding it moves the headline readouts, “Paid off” and “Interest left to pay”, and redraws “Balance over time” and “Monthly P&I payments”. The “Month by month” ledger lists the schedule.
The block swaps the rate and keeps the remaining term, so the projection shows what the rate alone does, without a fresh 30 years. The planner's notes under “What this plan doesn't capture” say the schedule is “Principal and interest only”: closing costs, taxes, insurance and escrow sit outside it.
The public mortgage payoff calculator →Key takeaways: Refinance
- A refinance pays off the existing mortgage with a new loan at a new rate, term or both, with its own closing costs.
- The break-even is the closing costs divided by the monthly difference in payment.
- A fresh 30-year term lowers the payment by stretching the balance, which adds interest; keeping the remaining term shows what the rate alone does.
- A recast keeps the loan and only recomputes the payment; a refinance replaces it.
Questions about Refinance
What is a mortgage refinance?
A new loan that pays off the existing mortgage, taken out to change the rate, the term or both, or to take cash out against the home's equity. It comes with closing costs and a new amortization schedule.
How does refinancing change my payoff?
The new rate and term set a new schedule from the refinance date. A lower rate over the same term lowers the payment and the total interest. In the planner, which keeps the remaining contractual term, the payoff lands on the note's original maturity date: unchanged for a loan on schedule, later for one that had been prepaid ahead of it. Outside the planner, a fresh 30-year term moves the payoff date out and can raise the total interest even at a lower rate.
What is the difference between a refinance and a recast?
A refinance replaces the loan with a new one at a new rate and term. A recast keeps the loan and its rate and recomputes the payment after a lump-sum principal payment.
Can Taiga Finance show what a refinance would do to my mortgage?
Yes. The mortgage payoff planner's Refinance block takes a new rate and a date, keeps the remaining term, and shows the resulting monthly P&I, payoff date and total interest beside the current loan's. Closing costs sit outside the schedule.