Refinancing is often used to lower your interest rate. If rates have dropped since you last financed your home, you may want to consider refinancing. Other common reasons to refinance include paying off a balloon payment, converting an adjustable-rate loan to a fixed-rate loan, or extracting cash equity from your home (cash-out). Common uses for cashing out include home improvement, funding education, and consolidating debt.
Another way to convert equity in your home to cash is through a "home equity" loan. A home equity loan is an alternative to refinancing if your current home loan has a very low rate compared to current interest rates or if you have a prepayment penalty on your loan.
