Definition
Replacing a loan with a new one at better terms. Powerful for private loans and mortgages when rates drop; refinancing federal student loans into private ones permanently gives up federal protections.
Why it matters
A refinance is the rare move that changes a payment without changing your life, but closing costs and lost federal protections mean the math has to be run, not assumed.
Example
Refinancing a $300,000 mortgage from 7% to 5.5% cuts the payment from about $1,996 to $1,703, saving $293 a month. Against $6,000 of closing costs, breakeven arrives in under two years.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.