Rate-and-Term Refinance
A rate-and-term refinance lets homeowners replace their existing mortgage with a new one—typically to lower their interest rate, adjust the loan term, or both. Unlike a cash-out refinance, this option focuses on improving your loan structure rather than taking equity out.
With today’s flexible lending options, you can even roll your closing costs into the new loan amount, reducing the need for upfront cash at closing. Whether you’re looking to pay off your mortgage faster or reduce your monthly payment, a rate-and-term refinance can help you reach your financial goals more efficiently.
Key Benefits of a Rate-and-Term Refinance
- Lower Your Interest Rate: Reduce your monthly payments or total interest paid over time.
- Change Your Loan Term: Shorten your term to pay off the loan faster or extend it for lower monthly payments.
- No Cash Needed at Closing: You can roll closing costs into the new loan instead of paying them out of pocket.
- Convert Loan Types: Switch from an adjustable-rate mortgage (ARM) to a fixed-rate loan for more stability.
- Remove a Borrower: Ideal for separating finances after divorce or life changes.
Simplify Your Mortgage: Consolidate a first and second mortgage into one streamlined payment.
When It Makes Sense
A rate-and-term refinance makes the most sense when:
- Current interest rates are lower than when you bought your home.
- You want to pay off your loan sooner without increasing your payment dramatically.
You plan to stay in your home long enough to break even on refinance costs.
