by 
The Curious Bag
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A borrower can refinance his mortgage to adjust terms and rate, or he can use the equity in the home to pay other debts and receive extra cash at the closing table.
Significance
Refinance is the term used to describe the payoff of an original debt with a new debt, of the same or larger size for a new term and interest rate.
Function
Refinancing allows a borrower to take advantage of lower interest rates than where available when he first bought the mortgage. Or, it allows him to use his equity for other purposes than future real estate profits.
Time Frame
A borrower can refinance a home as early as six months after its purchase, depending upon the loan company's rules and regulations.
Considerations
Refinancing is not free, however, closing costs do apply. The costs can range from 3 percent to 6 percent of the mortgage itself.
Misconceptions
Although a lower interest rate may be appealing, if it takes longer than two years for the savings to the borrower to pay off the closing costs, the deal may not be financially beneficial.
Source:
InvestorWords.com: Refinancing
The Federal Reserve Board: A Consumer's Guide to Mortgage Refinancing
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