Refinancing is the paying off one loan by obtaining another loan. Refinancing is generally done to secure better loan terms. It is the process of replacing an older mortgage with a new mortgage.
There can be lots of reasons when borrower might want to refinance. One of the main reasons for refinance their mortgages is to take advantage of lower interest rates. If rates have lowered since the time of original mortgage, he may refinance his mortgage at a better rate and can reduce monthly payments.
If rates have increased, or borrower is worried they might and he have an adjustable rate mortgage then he may consider refinancing to lock-in a rate.
Before Refinancing, it is important to determine the best type of a new mortgage. The type of mortgage loan select will depend on how long one expect to continue and the amount of monthly payment he can comfortably afford.
In any case, it pays to consult the lender or financial advisor, or run the numbers yourself, before refinancing.