As senior area manager of Citywide Home Loans in Denver, Colorado, Gavin Ekstrom draws on an in-depth knowledge of mortgage lending. Dedicated to helping his clients understand and navigate the borrowing process, Gavin Ekstrom has received recognition as a Five Star Mortgage Professional.

Mortgage refinancing enables a borrower to pay off an existing home loan and secure one with a different interest rate and terms of repayment. In some cases, the borrower may be able to borrow a different total amount as well. The funds used to pay off the original loan come from the lender that processes the refinancing, and it is this money that the borrower repays.

Most borrowers choose to refinance either to benefit from earned equity or to gain a more desirable interest rate. Those with the former goal often choose a cash-out refinancing, through which the borrower increases the amount borrowed in exchange for cash in hand. Although this may result in higher monthly payments for some borrowers, significant drops in interest rates may allow a homeowner to keep payments the same or even lower.

Borrowers who refinance to secure lower rates may be more likely to turn to rate and term refinancing, in which the loan amount remains the same, but the interest rate and therefore the monthly payments are reduced. This tends to be most desirable for those borrowers for whom the financial benefit of refinancing is higher than the closing costs of a new loan.