When you refinance your mortgage, you're actually replacing it with a brand new mortgage loan. In doing this, expect to go through a mortgage application process similar to that of your original mortgage. Refinancing is often a sound financial choice that can allow you to meet a variety of needs:

  Reduce your monthly payments by taking advantage of lower interest rates or extending the repayment period.

  Reduce your interest rate risk by switching from an adjustable-rate to a fixed-rate loan or from a balloon mortgage to a fixed-rate loan.

  Reduce your interest cost over the life of your mortgage by taking advantage of lower rates or shortening the term of your loan.

  Pay off your mortgage faster (accelerating the build-up of equity) by shortening the term of your loan.

  Free up cash for major expenses or to consolidate debts (Both home equity financing and a cash-out refinance loan will accomplish this.