Am I the only one who doesn’t understand how mortgage refinancing works? I’m having trouble understanding how a loan instrument can be used to purchase more properties or even negotiate better rates.

Question

How are these advantages possible AFTER a mortgage has been signed? Help needed as I’m trying to wrap my head around financial mechanisms – why is this a thing and under what circumstances/ conditions does a refinancing make the most sense to use?

In: 293

Answer 1

Mortgage refinancing is when you replace your current home loan with a new loan from another provider.

You do this to get better loan terms, like a lower interest rate or a shorter loan period. When you refinance, you pay off your old loan with the new one.

Then, you make payments on the new loan until it’s paid off or you refinance again.