Function

• Refinancing a home creates a new mortgage loan. You can refinance with your present lender or choose a new lender. Once you sign the refinancing documents, the new loan pays off the old mortgage.
  
  

Types

• There are two types of refinances. You can select a traditional or standard refinance, which creates a new loan and changes the terms of your original mortgage agreement. With a cash-out refinance, you can borrow money from your equity and use the cash to pay off debts or make home improvements.
  
  

Considerations

• Because mortgage refinances create a new mortgage, you'll have to pay mortgage-related fees. These include an application fee, credit report fee, title search fee, appraisal and closing costs.
  
  

Benefits

• Refinances are beneficial because homeowners are able to convert their high-interest mortgage, adjustable rate mortgage or interest-only mortgage to a low, fixed rate. In turn, monthly payments remain affordable. What's more, borrowers can extend their home loan term with a refinance and reduce their payments.
  
  

Expert Insight

• Before applying for a refinance, contact a minimum of three mortgage lenders and ask for a free loan quote or good faith estimate. Compare the refinance fees and terms, and choose the cheapest offer.