Equity is like having your own personal ‘savings account,’ but instead of being at the bank it is in your home. Basically, it is the money that is created from the difference between the value of your home and the constantly decreasing amount of your mortgage.
The amount of equity in your home is one of the factors that determines the maximum amount mortgage refinancing that can be done by mortgage lenders.
Banks will refinance up to a maximum of 80% of the value of the home, while private lenders will allow you to refinance your mortgage up to 95% of the value of your home, providing certain conditions are met.
Mortgage refinancing is a convenient way to reduce the high interest charges and corresponding high monthly payments that are typically associated with credit cards, certain private mortgages, and judgements.