Mortgage loans A tutorial
In doing so, you use proceeds (or some of them) from the new loan to pay off the balance of the existing mortgage. If the interest rate is lower than when you initially purchased your home, you may be able to lower your monthly payment. Plus, in some cases, mortgage refinancing also lets you "cash out" some of the equity you have built up in your home. This allows you to use the equity for improvements or other expenses without having to sell your home. Here's an example of how mortgage refinancing works: When Sarah purchased her home a year ago, she financed it with a 30-year fixed rate loan.