What really happens when you refinance?

[Shon Drennan]

I'm curious if someone can explain this so I can understand how refinance works. If I were to finance a house for $100,000 then later refinance for $150,000. How is it that you make $50,000? Would that not just be an extra $50,000 into the loan making the monthly payments higher? Or is this something that would only work if cash were paid for the house? And if that's the case wouldn't that lead to having a loan on the house and having to pay monthly payments? Any information explaining this would be greatly appreciated. Thanks all!

[Chris Mason]

You aren't really "making" $50k. You have $50k more in your pocket, and you're $50k more in debt. Your net worth is exactly unchanged, you've just liquidated a portion of it.