What is Mortgage Refinance?
A Mortgage Refinance is remortgaging your existing mortgage by using the equity in your home. For example; you have a mortgage of $200,000.00 and a home worth $400,000.00. You can borrow up to 90% of your home value, in this case up to $360,000.00 ($400,000.00 x .90%). Your new mortgage will be the $200,000.00 plus the extra money you take out.
People will refinace their mortgage for different reasons. The main reasons are to consolidate outstanding debt into one mortgage, i.e. roll in any out standing line of credit, visa etc therefore benefiting from a much lower interest rate (mortgage rate) and only having one monthly payment. You can save a substantial amount of money in monthly cash flow by doing this. Another reason is to use the money for down payment on a new home. Because the equity in your home is technically your own you can use these funds as a down payment to purchase an investment property, cottage or second home.
At the end of the day the equity is yours so you can use the money for any purpose. Some people will break there existing mortgage to benefit from a new lower interest rate. There may be a penalty to break an existing mortgage but the benefits can make it well worth it.