Rate and Term Refinance
In the mortgage realm, a “refinance” refers to the replacement of an existing mortgage(s) with a new home loan. The refinance loan will come with a new interest rate (ideally lower) and mortgage term. The existing mortgage is effectively paid off by the opening of the new refinance loan, with the old balance being transferred to the new loan.
Think of it this way – you are re-financing your mortgage, meaning you are obtaining new financing for an existing loan. The issuer of the new mortgage pays off the old loan with the proceeds from the new loan.
When you obtain new financing, you can either go back to your original mortgage lender or shop around with other banks and lenders. Either way, when you refinance you are seeking out new financing terms for one reason or another.