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 to extract cash equity in your home
(cash out). A few reasons for cashing out include: home improvement, an
education fund, and consolidating debt.
Another way to convert equity in your home to cash is a "home equity" loan. A
"home equity" loan is an alternative to refinancing if your home loan has a very
low rate compared to current interest rates or if you have a prepayment penalty
on your loan.