kittylover4ever, I used to do refinancing for a living so feel free to ask me anything. I can answer most ?'s...
People refin for tons of reasons... pymt relief: consolidating all cr cards & stuff w/your mortgage you can get a lower mos pymt and only pay 1 pymt p/mos instead of $100 to visa, $100 to MC, $1000 for mortg...you can wrap it all into 1 debt and pay maybe $800p mos. freeing up $400 of disposable income.
Cash Out: alot of ppl need cash out, for home improvements, lux purchases like a boat, college for their kids etc. You can borrow $ against your property and use it for whatever you need.
Lower Int rate: some ppl refin for a better rate...which really equals a better pymt and more $ to your principle balance owed. If your paying 7% you can get it refin @ say 4% and pay the same pymt more $ goes to your actual bal owed on the property.
An equity loan is any loan against property (or something you have value in like a boat or car in which you can borrow against). Your mortgage is the loan you pay the bank for your home. If the home is valued @ $100,000 and you've paid into it $25,000, you can borrow an amt up to that 25G back as a second mortgage (they like to use the catchy "home equity loan" cause mortgage sounds so tied down or final). Most lenders/banks will allow you to borrow 100% LTV (loan amt to the value of your home).
2nd Mortgages: these can either be closed end (set up w/a certain rate, a certain pymt, for a set term like 15 yrs) or revolving (set up like a credit card, where it's a revolving loan amt that you can borrow against...the loan amt is 25G's maybe you only need 10G's now and then later you can borrow 5G's with an open amt of available credit) Interest is calculated like a credit card but for a much better rate (only the rate is not as good as a 1st mortgage).
All loans/mortgages against the property are aka liens against the title of the property. If you would sell your home, you HAVE to satisfy all liens or pay off all liens owed before releasing the title to the new buyer.
Obviously, people have different needs. The best option would be to completely refinance pay the lowest possible int rate, throw in a few high pymt cr card bills, free up some cash flow for yourself and just pay it off. But ppl might want the revolving loan if say they have to keep borrowing and paying off the amts, like self employed ppl may need 5G's now, but are expecting income soon so they can pay it back.
One last thing... if you pay your 30 yr mortgage bi-weekly you will shave off 10-13 years off your loan. It works like this: your pymt amt is $1000, so you pay $500 every 2 weeks (when most ppl get paid). What happens is that every calendar year there are 2 mos with 3 pay periods...you pay the $500 every 2 wks through those mos that you have an extra pay check and end up paying 1 extra mortgage pymt p/yr. Every year for so many years, knocking off interest and paying more to your principle amt faster and you get paid out of your loan years faster!!!
If you have any ?'s about PMI, points, fees, etc feel free to PM me, I'm on TCS all day at work!!!