Quick answer
A refinance replaces your current mortgage with a new loan that pays the old one off. People refinance to get a lower rate or payment, change the loan term or type, drop mortgage insurance, or borrow against their equity — and they pay closing costs again to do it.
Key facts
Types of refinance
| Type | What changes | Cash to you |
|---|---|---|
| Rate-and-term | Rate, term or loan type | Little or none |
| Cash-out | A larger loan replaces the old one | The difference, minus costs |
| Streamline (FHA, VA, USDA) | Rate or payment, with less paperwork | None or very little |
What it costs
Freddie Mac puts typical refinance costs at 3%–6% of the loan principal — $9,000 to $18,000 on a $300,000 loan — paid in cash, rolled into the balance or covered with a higher rate. A refinance pays off only if you keep the new loan past its break-even point. Restarting a 30-year term can also raise the total interest you pay even when the monthly payment falls. Run your numbers through the refinance break-even calculator.
Sources
- Freddie Mac My Home — Typical refinance closing costs, low end (share of loan principal); Typical refinance closing costs, high end (share of loan principal) (Oct 28, 2026)
- Freddie Mac Primary Mortgage Market Survey — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- CFPB: Should I refinance? (handout)
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.