Anyone have a good link to the basics of the refinancing process?

[Michael Bentz]

Can someone point me in the right direction for understanding how a refinance of a home/duplex works? I get that you have equity and that’s valuable, but I just can’t seem to get my head around the numbers side of it - An example would be best, so if there’s a thread with this already I’d love to see it but I can’t search on the app! Thanks!

[Hadar Orkibi]

@Michael Bentz  Did you try to google "what is refinance?"

Basically you are replacing current lone with another. often it is done when you can achieve better terms on the new loan OR if the property gone up in value you can refinance the property and pull some of the equity out. 

Example:  you purchase the property for $400k with 80% loan to the value/ purchase price. so the loan is $320k and the 80k is the down payment you had to put as the remaining 20%.

After 2 years the  house is gone up in value to $500k, now you can go to different bank and ask them to give you 80% of the new value of $500k. 

80% of 500k is $400k. so the new Bank say yes to refinancing the existing loan to new loan of $400k.  

Note: now that the new bank provides you with new loan of $400k you will repay the original loan of $320k to the first bank and keep the $80k different.

Effectively you now get all your money back and have no money tide up in this property.

Note: you don't have to go to different bank, I just used this example as it is easier to understand when it is separated.

I hope that helps!