DEFINITION of 'Refinance Wave'

A situation where a large amount of mortgage refinancing occurs as a result of a drop in interest rates. The larger the drop in rates, the larger the "wave". A refinance wave can be triggered by a drop in short-term interest rates, in which case borrowers might refinance out of long-term, fixed-rate mortgages into short-term, adjustable-rate mortgages. Alternatively, a refinance wave might be triggered by a rise in short-term interest rates, in which case the same borrowers who refinanced into adjustable-rate mortgages will refinance into fixed-rate mortgages to avoid further increases in the rate on their adjustable rate mortgages.

BREAKING DOWN 'Refinance Wave'

Borrowers need to be aware that refinancing a mortgage is not free - costs are frequently rolled into the new mortgage's balance. Additionally, refinancing into a new mortgage with a longer term might mean that more interest will be paid over the life of the new loan than would have been paid on the existing mortgage, even if the new mortgage has a lower interest rate.

RELATED TERMS
  1. Mortgage Rate

    The rate of interest charged on a mortgage. Mortgage rates are ...
  2. 3/27 Adjustable-Rate Mortgage - ...

    A type of adjustable-rate mortgage (ARM) frequently offered to ...
  3. Alternative Mortgage Instrument

    A broad category of mortgages that vary from fixed-rate, fully ...
  4. No-Cost Mortgage

    A mortgage refinancing situation in which the lender pays the ...
  5. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  6. Purchase Mortgage Market

    A mortgage market for home financing transactions. The primary ...
Related Articles
  1. Investing

    Should You Refinance Your Home if You're Over 50?

    Whether you should refinance your mortgage or not depends on your savings but for people over the age of 50 there are other specific factors to consider.
  2. Personal Finance

    Should You Refinance Your Mortgage When Interest Rates Drop?

    Refinancing is a great way for many homeowners to improve their financial situation - but beware of the downsides.
  3. Investing

    When Does It Pay to Refinance Your Mortgage?

    Mortgage interest is among a homeowner’s biggest expenses, so refinancing is a popular way to lower costs, but it doesn’t always make sense.
  4. Insights

    How Interest Rates Affect the Housing Market

    Understand how rate changes can affect home prices and learn how you can keep up.
  5. Personal Finance

    Shopping for a Mortgage in 2017? Use This Tool First

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2017 can all be done online.
  6. Personal Finance

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  7. Personal Finance

    Forecasting Mortgage Rates: Buy, Sell Or Refi?

    If you're paying off a mortgage or plan to buy a home, chances are you pay attention to where mortgage rates are heading. Consider these scenarios.
  8. Personal Finance

    7 Mortgage Trends To Expect In 2011

    How will the year compare to 2010? What's likely to be different?
  9. Personal Finance

    5 Things You Shouldn't Tell Your Mortgage Broker

    Applying for a mortgage can be a strenuous process. Here are five things to avoid doing when meeting with your mortgage broker.
RELATED FAQS
  1. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
  2. What is an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
Trading Center