A mortgage refinance is a new loan that pays off and replaces an old mortgage loan. Since mortgage loans are not typically amended, a refinance mortgage is the easiest means of restructuring mortgage debt. There are several reasons why you might do this: to lower the interest rate or payments, to shorten or lengthen the loan maturity, or to increase or reduce the loan amount.

If you have home equity, you may have the option of refinancing for more than what you owe on your old mortgage. This is a cash-out refinance, in which the amount leftover after the pay-off is transferred to you, and can be used as you wish. Your payment will reflect a higher loan balance, but you could possibly offset some (or all) of the increase with a lower interest rate or extended maturity date.

The application process for a mortgage refinance is very similar to what you experienced when you purchased your home. You consult with a mortgage lender, have the home appraised, complete a home loan application, and supply the required documentation to verify your income and assets. You'll have to pay closing costs, but they should be lower than they were when you purchased the home. When the refinance mortgage funds, the new lender automatically pays off the old mortgage lender, including any prepayment penalties, and transfers any remaining funds to you. The old lender releases its claim on the home, and the refinance lender files a new one.

You can reduce your payment with a mortgage refinance by lowering the interest rate and/or by extending the maturity date.

Many homeowners start thinking about refinancing when there's some part of the existing mortgage loan that's no longer appealing. Examples include:

• Your payment is too high
• Your interest rate is higher than what's available on the market
• Your adjustable interest rate is too volatile
• You want to pay off your mortgage in 15 years instead of 30
• You want to cash out your home equity

A refinance calculator can help you run the numbers, but the decision usually depends on how market mortgage refinance rates compare to what you're currently paying. If you can find a refinance mortgage that will save you money and help you achieve your financial goals, then the time is right.