Refinancing.

A refinance occurs whenever a revision to your existing mortgage takes place (i.e. revising your: payment schedule, interest rate, any other aspect of your loan agreement). Typically, borrowers look to refinance when the housing market begins to offer more favourable terms then what their current mortgage does. 

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Why refinance?

simple answer is: to

save money.

Whether it is the credit profile of the borrower improving, the current market giving more favourable terms than the one the loan was originated in, or long-term financial plans changing, refinancing is often looked at when payments can be reduced by doing so.

Types of Loan Refinancing.

While there are several types of refinancing options, among the most common is called a rate-and-term refinance. Rather than modifying the existing loan,

this type of refinancing

pays off an existing loan, and replaces it with a new lower interest one. This is particularly useful when interest rates fall, the credit profile of a borrower increases, or another bank offers a customer better terms than what they already have.
Another useful type of refinancing is a cash-in refinance. This essentially allows the borrower to make a large payment in order to pay down the loan. When this happens, the loan-to-value ratio is decreased and in turn the monthly payments are lowered. Many borrowers find this useful when receiving a bonus or other increases in income, and would like to put the money to use in helping reduce future payments.
Consolidation is a useful option for those who have multiple credit obligations that vary in interest rates, some obtained at a time when they were higher than the current market average. In short, consolidation takes multiple different credit lines, pays them off, and replaces them with a single loan. This option totals all the debt, keeping their principle balance across all obligations the same as before, while the total amount of interest being paid out is lower.