Home Refinance is, simply put, a new mortgage with different terms. Doesn’t sound too complicated, right? It isn’t. But it’s easy to get overwhelmed by the wealth of information out there – and that, my friend, is what I’m here for.

People refinance their homes for a slew of different reasons. You may have found out you can get a better interest rate, or maybe you need to reduce your monthly payment. Whatever your reasons are, refinancing your home will most likely end up saving you money- either just in the short term or the long term.

How it works
You’ll start out by applying for a new mortgage. That mortgage will be drawn up based on a bunch of different things, like how much your house costs and what your income is. Staying with me so far? Good. They’ll also take into account something called your “home equity.” That’s going to be the value of your house minus what you still owe on the mortgage you’re trying to replace. After you’ve gone through all the red tape, your old mortgage will go into what is called “closing,” and it will be replaced by the new one.

You may be wondering if there’s more than one way of refinancing your home. Very good question. There are two types of home refinancing. The first is called “cash-out.” This is when you borrow more money than you actually owe, and take the difference of that back in cash. The second, and more common type of refinancing, is called “straight” refinancing. With this type, you’ll borrow only as much as you owe on the original mortgage that you’re trying to replace. This is a good one, because you’ll save money as time goes with lower monthly payments.

Like any decision involving large sums of your hard earned dough, there are risks involved. Those risks mostly surround that cash-out refinancing I mentioned. If housing prices drop, you could end up owing more than the house is actually worth. That means if you want to sell it, you would have to actually pay out of pocket. You would lose money in the sale. So it’s extremely important to take a look at all the numbers involved: how much your house is worth, your income, your interest rate… I may be beating a dead horse, but you just have to look at the big picture before you make a decision. That being said, the best of luck to you in all your refinancing endeavors!