Refinance Wave

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. No Cash-Out Refinance

    The refinancing of an existing mortgage for an amount equal to ...
  2. Fixed-Rate Mortgage

    A mortgage that has a fixed interest rate for the entire term ...
  3. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  4. 3/27 Adjustable-Rate Mortgage - ...

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

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

    A mortgage refinancing situation in which the lender pays the ...
Related Articles
  1. Home & Auto

    When (And When Not) To Refinance Your Mortgage

    There are both good and bad reasons to refinance. Learn more about both here.
  2. Home & Auto

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

    Whether you should refinance your mortgage depends on your savings but for people over the age of 50 there are other specific factors to consider.
  3. Options & Futures

    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.
  4. Home & Auto

    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.
  5. Home & Auto

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  6. Credit & Loans

    Now's a Terrific Time to Buy (or Refinance) a Home

    If you are looking to make a purchase or do a refi, you will benefit from continuing low interest rates – that could dip even lower.
  7. Economics

    How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.
  8. Home & Auto

    Refinancing Your Mortgage Isn’t Always Worth It

    The housing industry has experienced its share of ups and downs over the last few years, but one bright spot has been affordable mortgage rates.
  9. Credit & Loans

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  10. Home & Auto

    Homebuyers' Walkthrough: Which Type Of Mortgage Is Best?

    Most homebuyers will need to secure a mortgage to finance their home. The lending climate has changed following the late 2000s financial crisis, and it may be more difficult to get approved for ...
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 are the pros and cons of a simple-interest mortgage?

    Learn the difference between a simple interest mortgage and a standard mortgage, along with their relative advantages and ... Read Answer >>
  3. How do I know if I should refinance my mortgage?

    The typical rule of thumb is that if you can reduce your current interest rate by 0.75-1% or higher then it might make sense ... Read Answer >>
  4. If my mortgage lender goes bankrupt, do I still have to pay my mortgage?

    Yes, if your mortgage lender goes bankrupt you do still need to pay your mortgage obligation. Sorry to disappoint, but there ... Read Answer >>
  5. 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 >>
  6. What are the best ways to pay off my mortgage quickly?

    Learn how mortgage payments may be reduced and how to save thousands on mortgage loans by lowering the interest and principle ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center