Paying off an existing loan with the proceeds from a new loan, using the same property as collateral for both. This may be done to reduce borrowing costs under conditions where the borrower can obtain a new loan at a lower interest rate. People may also decide to refinance in order to reduce the term of a longer mortgage, or switch between a fixed-rate and an adjustable-rate mortgage. Refinancing may not always be the best thing to do, especially if there are prepayment fees attached to their existing mortgage, as that would only increase costs to the borrower at the time.