Refinancing is the act of replacing an existing loan with a new one, usually to obtain better terms such as a lower interest rate, a longer repayment period, or different loan conditions. Homeowners often refinance mortgages to reduce monthly payments or save on interest over the loan’s term. While refinancing can lead to financial savings, it may involve costs like closing fees or prepayment penalties. Borrowers must weigh these factors to determine if refinancing is beneficial. This process can also help consolidate debt or switch between variable and fixed interest rates.