Why do people get mortgages?

Depending on the area, the price of a home can ranges from expensive to incredibly expensive. The vast majority of potential buyers do not have the money on hand to cover the full price of a home, and many of those that have the money are unwilling to reduce their available cash by placing it all within their home. Buyers will look to cover the difference between what they need to pay for the house, and what they are able or willing to pay for the house with a loan. The strategy of borrowing money to increase your buying power is referred to as leveraging. The initial act of providing borrowed funds for a purchase is called financing. 

Once a borrower owns a property, they can attempt to change the financial state of the property through refinancing. A borrower may be simply looking to improve their financial profile by refinancing the existing loan into an equivalent loan with a lower payment or more stable financing terms. These are examples of a limited cash-out refinance or no cash-out refinance. If the borrower has additional equity available, either due to the value of the property increasing or through their reduction of the loan principle from payments, a borrower can opt to tap into that extra equity by taking a larger loan amount and using the additional funds for other purposes. This is an example of a cash-out refinance.