Refinancing is basically taking a new mortgage to replace an old one.  Refinancing is often the best way to save money, get a lower interest rate and a lower monthly payment, or keep the monthly payment the same and have a shorter loan term.  Refinancing is used in most cases to improve overall cash flow.

Sometimes, refinancing is an appropriate way to resolve financial problems.  In the context of personal finance, refinancing a mortgage can be used to pay off high-interest debt such as credit card debt.  If your credit points have been decreasing in recent years, lenders may not endorse the refinance.

Refinancing may be undertaken to reduce interest rates, to extend the repayment time, to pay off other debt, to reduce or alter risk (such as by refinancing from a variable-rate to a fixed-rate loan), or to raise cash for investment.  Interest rates and number of credit points determine the total cost for a second mortgage refinancing.  Most refinancing lenders offer a variety of combinations of points and interest rates.  A general role of thumb is that refinancing becomes worthwhile if the current interest rate on your mortgage is at least 2 percentage points higher than the prevailing market rate.