Refinancing a mortgage to get a lower interest rate, change the loan term, or both — without taking additional cash out.
Full Definition
A rate-and-term refinance replaces your existing mortgage with a new one at a different interest rate, a different term (length), or both, without cashing out equity. Borrowers refinance rate-and-term to lower their monthly payment, reduce their total interest cost, switch from an adjustable to a fixed rate, or shorten their loan term to build equity faster. The decision should account for closing costs — typically 2–5% of the loan amount — and how long you plan to stay in the home (the break-even point). Online calculators can determine how many months it takes for the monthly savings to offset the closing cost outlay.
Related Terms
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