Refinancing · Rate-and-term

How does refinancing a mortgage work?

Written by Pete Amstutz, President and Co-Founder (NMLS ID: 2771958) · Published September 28, 2026 · Updated September 28, 2026

TL;DR: Refinancing replaces your current mortgage with a new one, with a different interest rate, loan length or both. The steps are to apply, have the home valued and the loan reviewed, then sign the closing documents. Compare the new terms and closing costs, including whether a longer loan would increase total interest.

Refinancing means replacing your current mortgage with a new one. The new loan pays off the old loan, and future payments follow the new terms. A rate-and-term refinance changes the rate, repayment timeline or both without taking cash out. Equity is your home's value minus what you owe on it.

That's the whole idea. The rest is process and math, so here's each part in plain terms.

What actually changes when you refinance?

A rate-and-term refinance can change your interest rate, loan term or both. Your home and ownership stay the same, but financing closing costs can increase the balance and reduce equity. A cash-out refinance is a different product that replaces the mortgage with a larger loan and provides cash after costs.

What are the steps in the refinance process?

1. Check your options. At Athena, checking your options uses a soft credit pull and does not affect your credit score. If you continue the application, Athena requests a full credit report from one or more consumer reporting agencies. This is a hard inquiry and may affect your credit. Consumer reporting agencies are companies that collect credit information and provide credit reports.
2. Apply. A full application asks for documents showing your income, savings and other financial details.
3. Appraisal and underwriting. An appraisal, a professional estimate of your home's value, informs underwriting, the lender's review of your finances and property. If the appraisal is waived on an eligible loan, an accepted property value is used instead. Closing timelines vary by loan and borrower. You'll receive regular updates throughout the process.
4. Review your Closing Disclosure. Before closing you get the final figures — rate, payments, and itemized costs — with time to compare them against your Loan Estimate.
5. Close. Sign the closing documents. For a covered refinance on your main home, federal law generally provides a short cancellation window. After that window expires and the lender confirms you have not canceled, the new loan can fund and pay off the old one. At Athena you can apply online.

What does refinancing cost?

Your Loan Estimate is a standard form that lists estimated loan terms and costs, including Total Closing Costs. Use it to compare the costs with the proposed change in your loan. Your quoted rate depends on factors including loan-to-value (LTV), your loan balance divided by your home's value, and debt-to-income (DTI), your monthly debt payments compared with your monthly income.

No lender fees. Zero points required.* Third-party and prepaid costs (appraisal, credit, title, recording, and interest from closing to your first payment) still apply.

Points are optional upfront charges paid to get a lower interest rate.

*Athena charges no origination, application, processing, underwriting, or rate-lock fee. The rate we quote requires no discount points; you may choose to buy your rate down for an additional charge. You'll still pay third-party and prepaid closing costs — appraisal, credit, title, recording, and interest from closing to your first payment. Your rate depends on credit, loan amount, LTV, DTI, and market conditions at lock.

Third-party and prepaid costs can include appraisal, credit, title, recording, tax service and prepaid interest. Your Loan Estimate itemizes the amounts for your loan.

When does refinancing make sense?

Compare the costs of getting the loan, excluding prepaids and escrow deposits for expenses you would pay anyway, with monthly principal-and-interest savings to calculate the break-even point. Principal is the amount borrowed that you still owe; interest is the charge for borrowing it. The calculation estimates how many months of those savings would cover the costs. See When is refinancing worth it? for worked examples. Extending the loan term can lower the payment while increasing total interest, so compare both.

Frequently asked questions

Does checking my refinance options affect my credit?

See step 1 of the process for how the initial check differs from continuing an application.

Do I need an appraisal to refinance?

Usually, yes. An appraisal establishes the home's value. On some eligible loans, the lender may waive the appraisal and use the property value accepted by the automated underwriting system. That value is used in the LTV calculation; your lender can explain what applies to your loan.

Do I have to restart my loan term from the beginning?

No. The term is part of what you choose. Starting a longer term can lower the monthly payment but mean paying interest for more years. A shorter term can keep the original payoff date roughly in place; compared with a longer term at the same rate and balance, it generally means a higher payment and less total interest. Neither is wrong. They are different trade-offs, and the actual rate, balance and costs affect the comparison.

Is there a fee to see my options?

No, seeing your options is free. If you proceed with a refinance, the fee section explains the costs that still apply.

What types of refinancing does Athena offer?

Athena currently offers conventional rate-and-term refinancing and cash-out refinancing, including in Texas under Article XVI, Section 50(a)(6). For a primary-residence cash-out in Texas, final papers are signed in person at a lender's, attorney's, or title company's office rather than online; disclosures carry the remaining limits and timing. It does not currently offer purchase loans, government-backed loans (FHA, VA or USDA), jumbo loans above standard conforming loan-size limits, HELOCs or second mortgages. A home equity line of credit (HELOC) is a credit line secured by the home; a second mortgage is an additional loan secured by a home that already has a mortgage.

Does Athena operate in my state?

Athena's current state licenses are listed at athenamoney.co/licensing, and you can verify any lender's license at NMLS Consumer Access.

Curious what your numbers look like? See your rate-and-term options at athenamoney.co.

Educational content, not a loan offer, rate quote, or personalized advice. Rates, savings, and terms depend on your credit profile, loan amount, and market conditions; see your Loan Estimate for actual figures. Third-party and prepaid costs such as appraisal, credit, title, recording, tax service and prepaid interest still apply. Not a commitment to lend. For Athena's current state licenses, see athenamoney.co/licensing/.

Related reading

Read how a cash-out refinance works, how much equity a cash-out refinance needs, when refinancing is worth it, or explore Athena's refinancing overview.

Sources:

• Athena, refinancing overview, for product and application information.
• Athena, pricing information, for the fee policy and closing-cost context.
• Your Loan Estimate and Closing Disclosure, for your loan's costs and terms.
• Athena, licensing information, and NMLS Consumer Access, Athena company record, for lender identification and licensing.

NMLS #2771910. Equal Housing Lender.