In what circumstance might a borrower consider refinancing their mortgage?

Refinancing a mortgage is often considered by borrowers aiming to secure a loan with a potentially lower interest rate. This scenario provides the opportunity to reduce monthly payments and overall interest costs throughout the life of the loan. When interest rates fall below the original rate the borrower is paying, refinancing can lead to substantial financial savings, making it a compelling reason for a borrower to pursue this option.

Reducing the interest rate can also enable borrowers to pay off their mortgage more quickly or to free up cash flow for other expenses, contributing to better financial stability. Additionally, if a borrower has an adjustable-rate mortgage, refinancing to a fixed-rate loan can provide certainty and protection against future rate fluctuations, further enhancing the benefits of opting for a lower interest rate.

In contrast, the other answers present scenarios that typically aren't the primary motivators for refinancing. Increasing the loan amount might involve progressively more debt without necessarily improving the borrower's financial situation. Extending the term of a loan without changing conditions doesn’t provide a direct benefit and may mean paying more interest over a longer period. Avoiding closing costs is usually not feasible because most refinancing processes involve some upfront costs that are essential for processing the new loan, making this option less practical.

Overall, securing a loan with a potentially lower