Refinancing means repaying an existing home loan before its tenure with the money from a new loan taken under new terms and conditions. The following circumstances may trigger refinancing:

1. Interest rates in the economy have fallen and it makes sense to retire the old high cost fixed rate loan with a new fixed rate loan at the lower rate. You can do this provided rates have fallen enough to cover your prepayment penalty and the up front costs of initiating a new loan (like processing fee, administrative fee etc.)

2. If you plan to sell the home during the tenure of the original loan you will need to terminate the loan borrowing the remaining principal amount against the home equity or from the potential buyer.

3. Switch from a Fixed rate loan to a more flexible Floating rate / Hybrid product You may want to switch from a Floating rate loan to a fixed rate loan if interest rates start to move up (see the discussion on "How will interest rates move?" under 'Choosing a Loan')

4. You can lower your monthly installment payments by extending the tenure of the new loan.In order to improve your monthly cash flows you can prepay an existing loan with 5 years to go by taking a new 15 year loan for the remaining principal amount.