When you are looking to purchase a house, you will probably think of a mortgage to do so. A mortgage is when a financial institution lends money to a borrower to buy a home. After you borrow a mortgage, that stake in the house becomes your equity. A home equity loan is also a mortgage. The principal difference is that you take out a home equity loan after buying and accumulating equity in your home.
Mortgage refinancing means that you replace your current mortgage with a new loan. This new loan will ideally have a lower interest rate. It can allow you to lower your monthly payment and save money on interest over the life of your loan. Moreover, with a refinance you can draw from your home’s equity in case you need cash. Also, you can pay your mortgage off sooner.