Refinancing your mortgage refers to paying off your current mortgage with a new mortgage, in simple terms. People refinance for many reasons, to consolidate debt, to lower their interest rates, to switch to a lower or higher loan term, to take cash out of the equity in their homes, to invest money, to buy other real estate, to change to a different loan program, and for a wide variety of other reasons. You must keep in mind that by refinancing you will most likely incur closing costs and refinancing is not good for all situations. You need to carefully weigh the pros and cons of refinancing before you do it. For example if you were to refinance to get 10k out of the equity in your home but your rate increased by 2% and your payment went up 500 dollars, this would probably not make sense to refinance. When you refinance you are taking out a new loan which will pay off the old mortgage.