What are Residential Refinance Mortgage Loans?

In the financial world, there is an entire language used that most people are not familiar with.  However, if you want to be armed with the tools necessary to exact change in your financial situation, it is a must that you understand what these financial terms mean.  Residential refinance mortgage loan is one of those financial terms that will be of use to you at some point in time.

Residential Refinance Mortgage Loan: What is it

Residential refinance mortgage loans are loans made based off of the equity you have in your home.  Equity is the difference between what the market says your home is worth and the amount you still owe the bank on the property.  As you make payments on your mortgage, the principle amount you owe the bank decreases and the amount of equity you have increases.

It is this equity that you "cash out" when you seek a residential refinance mortgage loan.  The bank will use the appraised value of your property versus the amount you owe to determine how large the loan can be.

Residential Refinance Mortgage Loans: How to Use Them

How you use your loan is up to you.  Often, people will use the money to make major improvements on their home such as remodeling the kitchen or building an additional room.  These improvements will increase the appraised value of the property.  Real estate investors often use refinancing in order to cash out the original amount of money they invested in the property.  They will then use that money to make the down payment on another property.  In any case, residential refinance mortgage loans are one method of obtaining a large amount of money when you need it.