What does refinance mean?
Refinance is a verb meaning to replace existing borrowed money with a new loan or credit arrangement. It is commonly used when someone obtains a mortgage with a lower interest rate, extends the repayment period, changes lenders, or otherwise improves the conditions of a debt. The original loan is generally closed when the new financing begins, so refinancing is not simply the same as borrowing additional money. The word can also be used more broadly to describe revising an existing financial arrangement. Refinancing is especially frequent in discussions of mortgages, business loans, credit facilities, and public debt. Although it may reduce the interest rate or monthly payment, it can also extend the time needed to repay the debt, so the overall financial effect depends on the terms of the new arrangement.
verbTo arrange new financing for an existing debt, usually by replacing an old loan with a new one on more favorable terms. It can also refer more broadly to improving or restructuring an existing financial arrangement.
- To arrange a new loan or other form of credit to replace existing debt, often with a different interest rate, repayment period, or lender.
- To revise or improve the financial terms of an existing arrangement.
"The homeowner refinanced the mortgage to obtain a lower interest rate."
"They refinanced their mortgage and reduced their monthly payment."
"The company refinanced its credit facilities to gain greater financial flexibility."
Refinancing can make an existing loan feel new without changing the underlying amount borrowed.
Reviewed by Deb Chak, Editor. AI-assisted content curated by RJS Tech Solutions LLP.
Where does refinance come from?
The word combines the prefix re-, meaning again, with finance. Finance entered English from French and ultimately relates to the Latin finis, meaning “end,” through the idea of settling or completing a financial matter. The prefix re- in refinance indicates repeating or renewing that financial arrangement, so the word literally conveys financing something again.
Related word forms
How refinance is actually used
The word is most commonly used for replacing an existing loan with new borrowing. It is generally formal or financial in register and can imply either a better interest rate, longer repayment period, or otherwise more favorable terms; it does not necessarily mean that the debt itself is reduced.
Easily confused with refinance
Refinancing replaces or revises existing borrowing, whereas finance refers more generally to providing or managing money for a purpose.