Refinancing is the process of paying off an existing mortgage loan using a new loan. In most case, property owners will refinance current loans when interest rates drop and they are able to realize a significant reduction in either their payment amount or the loan term. Many property owners refinance in order to receive a cash payment at the time of closing. This extra cash can be used for renovations or to assist with the purchase of another property. This is known as cash out refinancing. Refinancing loans are also common for individuals who purchased a property with an adjustable rate loan. Locking in an attractive rate can be a huge cost saver for these property owners. Loans are based on the value of the property, the owner's equity in the property and current interest rates at the time of application.