Plain-language definitions
Refinance glossary
Short definitions for the terms that decide a refinance, written the way we use them on this site. If a lender uses one of these words to end a conversation instead of explain a figure, use the definition to restart it.
How to use these terms on a Loan Estimate
Read a quote in this order. Find the rate and term first, then the closing cost sections, then the words below that describe how the lender priced the trade between them. Break-even point tells you when savings repay costs. Discount points and lender credits are opposite ends of the same dial, with the par rate in the middle. Term restart warns you when a lower payment is mostly a longer loan. Rate-and-term and cash-out name the two loan types and their different pricing. The full fee walk-through lives in the closing cost guides, and every term here is used the same way in the decision guides and the worked scenarios.
Break-even point
The month when total refinance savings repay total closing costs. Before break-even, the refinance has lost money; after it, the savings are real.
APR (annual percentage rate)
The interest rate plus certain lender fees expressed as a yearly rate. Useful for comparing offers, though it assumes you hold the loan to term and can mislead on adjustable loans.
Discount point
A fee of 1% of the loan amount paid at closing to lower the interest rate. Worth buying only if you keep the loan past the point where the lower payment repays the fee.
Lender credit
A negative charge on the Loan Estimate where the lender offsets closing costs in exchange for a higher interest rate. The mirror image of a discount point.
Par rate
The lender's best rate for a given loan at no points and no credit. Quotes above and below par are priced relative to it.
Rate-and-term refinance
A refinance that changes rate or term and pays off the old loan without meaningful cash back to the borrower, usually priced better than cash-out.
Cash-out refinance
A refinance that increases the balance and returns cash to the borrower, usually with stricter equity limits and higher pricing than rate-and-term.
Escrow
Money held by the servicer and paid out for property taxes and homeowner's insurance, usually collected as part of the monthly payment.
Loan Estimate
The standardized CFPB form a lender must provide within three business days of application, itemizing rate, payment, and closing cost sections A through J.
Term restart
Extending the repayment horizon when refinancing into a term longer than the time left on the current loan. Lowers the payment even at the same rate, often raising lifetime interest.
Fully indexed rate
The index plus margin that sets an adjustable rate after its fixed period, limited by the loan's caps and floor.
Still missing a word your lender used?
Bring the Loan Estimate to the contact page and tell us which line it sits on. Fee names vary by lender and state; the section it appears in usually matters more than its label. For the math behind the words, read the methodology or run your own figures in the calculator.