Replacing the mortgage at a lower interest rate, which is entirely possible in today's market, would reduce the payment. On the other hand, shortening the term of the mortgage could make the payments increase but would allow the home to be paid for sooner. In either case, the equity would not be reduced unless the refinancing costs were rolled into the new mortgage.
Refinancing the home to take money out would increase the mortgage on the property and lower an owner's equity; careful consideration should be made before doing so.
Mortgage rates are considerably lower than credit card rates and usually lower than short term borrowing like student loans or car loans. For that reason, homeowners will sometimes refinance to payoff higher cost debt.
Some people refinance for more than their current balance to improve their cash position, possibly, to have funds available in case they need it. Other reasons could be to use it for an investment such as rental property or other things. Still others may use it to make capital improvements on their home like remodeling or a pool.
Another legitimate reason to refinance may be to combine a first and second lien on the home that might result in lower payments and a savings in interest.
One more situation that causes a person to refinance a home is to remove a former spouse or co-borrower from the existing mortgage. In the case of a divorce, a couple may no longer be married and one of the former spouses may have no financial interest in the home any longer but because they signed the note originally, they are still liable along with the other spouse. This could be an untenable position.
There can be a lot of reasons that cause a homeowner to refinance the home. The equity is a valuable asset that has powerful borrowing power combined with the good credit and income of the homeowner. A Refinance Analysis can help you to determine the new payments and how long it will recapture the cost of refinancing.
For the recommendation of a trust lender, give me a call at 208.946.7816.