Most people refinance simply to save money. A refinancing can get you a lower interest rate, lowering your monthly mortgage payment. Or it can reduce the term of the loan, which saves you money by helping you pay off principal more quickly. In the second case, you'll wind up with higher monthly payments, but the total amount of payments through the loan's life will be considerably lower.

Sometimes people refinance to convert adjustable-rate loans to fixed-rate loans. This gains them the stability they did not have with the adjustable loan. Fixed-rate loans are a great investment if you're in a period of low interest rates, but adjustable-rate loans are better when interest rates are higher.

A third group of homeowners refinances to consolidate debt and to replace high-interest loans and credit cards with a low-rate mortgage. The loans consolidated in the debt may include second mortgages, credit lines, student loans, credit cards, or many other forms of debt; and not only do you save money in the consolidated lower interest rate, but you also gain the tax advantages of a mortgage loan.