What is Rate-and-Term Refinance?
A rate-and-term refinance replaces your existing mortgage with a new one to obtain a lower interest rate, different term, or both, without taking additional cash out.
A rate-and-term refinance pays off your current mortgage and replaces it with a new loan that has a different interest rate, repayment term, or both. Borrowers use it to lower monthly payments, shorten the loan term to build equity faster, or switch from an adjustable to a fixed rate. You typically need sufficient equity and must qualify based on credit, income, and debt-to-income ratio. Watch for closing costs, a possible break-even period before savings exceed fees, and whether extending the term increases total interest paid. Unlike a cash-out refinance, you do not receive additional funds at closing beyond paying off the old loan and related costs.
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