Refinancing a mortgage involves taking out a new loan to pay off the old one, often to secure a lower interest rate. It's crucial to understand potential penalty fees from lenders and to have a good credit score for favorable terms. Before refinancing, assess your current mortgage payments and shop around for the best rates. Be aware of hidden fees, which can range from 3% to 6% of the loan balance. Various refinancing options exist, including rate-and-term loans and cash-out mortgages, each with specific requirements and benefits.