When you refinance do you pay back the loan from equity?
Answer:
The new lender pays the old lender. This is debt financing and should not have anything to do with the equity.
usually you start paying on the interest, the more you pay above what is due, that goes towards the principal.
Equity is the value difference between what you owe and what your property is appraised to be worth. If you refinance, you are creating a new loan premised on the new appraised value of the property. The proceeds from the refinance are to be used by you as you see fit. To accomplish the funding of the refinanced loan you must first pay what you owe on the old loan from the proceeds of the new refinance loan then the expenses associated with the closing and you get the balance. The paying back of the new refinance loan will be determined by your income and ability to pay for the new loan amount. I hope that this simplified explanation helps you to understand a little bit better.
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