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How does refinancing work?
You owe $20,000 to a loanshark, 1% per week interest.  I'm happy to get 1% per month, and trust you to pay it back, so I lend you the $20,000.  The first lender got his money, and now you are paying less interest as you pay the loan back. This is how a refi works, only the first bank won't try to break the legs of the second bank for moving into their business.  This line "reinvested the money into the mortgage to lower his monthly payments" implies he also paid it down a bit, maybr the new mortgage is less principal than the one before.