There is much confusion as to what a refinance loan actually is, and what its appropriate uses are. The refinance loan is similar to a standard home mortgage in that it is actually a home mortgage loan technically speaking. The major difference with a refinance loan is that it is being made to replace a current home mortgage. Most of the time, when a new mortgage is made, it is made for a new property, and although there might have been certain notes attached to that property before the home was purchased, those notes and other loans were removed when the seller sold the house. With a refinance loan, the current owner of the house actually takes out an entirely new mortgage on their own property. This eliminates their previous home mortgage, and replaces it with a brand new home mortgage loan-this is the refinance loan.
So now it is established that a refinance loan is a home mortgage loan in essence, and that it is unique because it is made to replace a mortgage that is already on the borrower's own property. The next questions revolve around why a person would want to refinance their current property. There are actually a number of valid reasons why a person would want to refinance.
A person might want to refinance to exchange their adjustable rate mortgage for a fixed rate mortgage, or vise-versa. Another reason a person would want to refinance would be to take advantage of a lower interest rate when compared to their current mortgage. Some people want either a shorter-term or longer-term loan for a variety reasons, and to do this they opt for a refinance. Many people actually choose to refinance to extract the equity from their current property and receive it as cash. All of these are valid reasons to refinance your current mortgage, and just be aware that you need to perform your own in-depth research in order to get the best deal.