What is "refinancing"?

What is "refinancing"?

Ron Goodlin (Mortgage Banker and Broker, The Goodlin Group) gives expert video advice on: Generally how far do interest rates need to drop to make it worthwhile for me to refinance?; What can I do if I disagree with the banks appraisal of my home?; Are too good to be true loan offers usually too good to be true? and more...

Refinancing is one of two things. Either you can do what's called a "rate and term" refinance, or you can do a "cash-out" refinance. For example: your house is worth a million dollars, your first mortgage is $500,000, you've got a 6 1/2 rate, and the going rate today is at 5 1/2. You want to lower your monthly payment to get it to 5 1/2, and you're going to keep your mortgage balance at $500,000. That's called the "rate and term" refinance. Cash out refinance is where if your current mortgage is at $500,000, and your new loan that you want is $600,000, you're now pulling $100, 000 of cash out of your home.