There are many definitions out there that explain what exactly refinancing is and most are based on mortgage refinance rates reasons. I searched on the Internet and here are some of the good explanations and definitions that I found:

• When you take out a new loan so that you can pay off existing loans that you already have. This is also known as consolidation.

• It is when you switch from one lender to another lender and you are still owing the same amount of money.

• It can be described as the process of getting a new mortgage to replace an existing mortgage.

• I like this one the best: It is the process of getting a new mortgage, usually at a lower interest rate, to replace the existing mortgage.

• This is also good: A way of getting a better interest rate, and therefore having lower monthly repayments. A second loan is taken out to pay off the first, higher-rate loan.

There are many more definitions available but the last one listed above pretty much covers it. As you can see, they all mean the same or similar thing.

When they refer to consolidation above, this has more to do with having many loans and then getting one loan to pay them all off so that you only have to pay the one big loan off. The people that you get this type of loan from will pay out the lenders you currently owe debt to and usually take care of all of this so you do not have to.
In summary, refinancing allows you to change your home loan to suit the new position you find yourself in. This could be due to financial hardship faced by you due to losing your job, for example. Or it could mean the need to change because there are better offers available that suit your needs more and they have better mortgage refinance rates.

So, the reasons on why you need to refinance are all yours but now you have a better understanding of what refinancing actually is. Maybe this will mean that you know if you need to do it or not but you still need to be sure before you go ahead with it.

One of the main reasons to refinance is because interest rates are increasing much quicker than you can cope and  you are not able to handle the payments for much longer. This is why you have to look around for the best mortgage refinance rates. They have to be better than the interest rate you are currently paying so that you get maximum benefit from them otherwise it is pointless.

This is how you do it. The very first thing you must do is to write down all the fees that you would have to pay if you exited from your current mortgage earlier than the agreed term. There are always fees associated with this, especially within the first five years of the loan. They are not really fees so much as penalties. If these are so much that it is better to stick with what you have got, and you won’t benefit within 2 years, then so be it. But you need to sit down and make those calculations and this is where the mortgage refinance rates play a big part.

You should also check your credit rating or credit report around this time. If you have been making your payments regularly and on time then you should be ok. On the other hand, if you have not then things will be a bit more difficult. The same lender may be willing to refinance with you because they know your history, but others may not. It is also worth pointing out that some lenders are willing to give you a chance because they know the circumstances and they want your business.

So all in all, you should refinance if it is of benefit to you within the first few years and the currently offered rates and the calculations you have made should help you find out. Your credit report at the time you want to refinance will also determine if you are able to refinance too.