Unlock Lower Payments with a **Rate and Term Refinance Loan**
The straightforward solution to reducing your interest rate or shortening your loan, all while keeping your equity untouched.
What Exactly is a Rate and Term Refinance?
A **Rate and Term Refinance** is a specific type of mortgage refinancing where the primary goals are to adjust the **interest rate** and/or the **loan term** of your existing mortgage. Critically, this type of loan only changes the terms of your financing, not the cash you receive; you are not allowed to take substantial cash out of your home's equity.
The Two Components You Can Change
The Rate:
You secure a **lower interest rate** than your current loan. This is the most common reason to refinance and directly leads to a reduced monthly payment.
The Term:
You change the length of time you have to pay off the mortgage, such as switching from a 30-year to a **15-year fixed loan**.
Why Choose a Rate and Term Refinance? (3 Key Benefits)
Maximize Cash Flow
When interest rates drop, refinancing to a new, lower rate can substantially reduce your monthly payment. This frees up immediate cash flow for other needs, such as investments or savings.
Build Equity Faster
If you move from a 30-year to a 15-year mortgage, you pay significantly less interest over the life of the loan. This accelerates your equity growth and gets you closer to full home ownership faster.
Secure Loan Stability
Many homeowners refinance to switch out of a high-risk loan structure, such as an **Adjustable-Rate Mortgage (ARM)**, and secure a predictable, stable **Fixed-Rate Mortgage** for peace of mind.
Calculating Your Break-Even Point
Our Senior Loan Specialist, **Joseph Schibelli (NMLS #123456)**, advises: "Before you proceed, you must calculate your **break-even point**. This is the moment in time when the savings from your lower monthly payment equal the total closing costs of the new loan. If you plan to sell your home *before* this point, refinancing may not be financially beneficial. We target a 0.75% to 1.0% drop in rate for most clients."
Rate and Term vs. Cash-Out Refinance: Which Is Right For You?
It is crucial to understand the difference, as they serve entirely separate financial needs.
Rate and Term Refinance (R&T)
**Primary Goal**
Lower interest rate or change loan term.
**Cash Back**
**No significant cash back.** Only up to $2,000 or 1% of the loan amount (whichever is less).
**Loan Amount**
Usually close to the existing loan balance + closing costs.
**Closing Costs**
Often lower or can sometimes be **streamlined** (e.g., FHA/VA).
**Verdict**
Best for saving money long-term.
Cash-Out Refinance (C/O)
**Primary Goal**
Access home equity for cash.
**Cash Back**
Significant cash disbursed at closing.
**Loan Amount**
Significantly higher than the existing balance.
**Closing Costs**
Typically higher due to higher principal and potential higher appraisal costs.
**Verdict**
Best for major one-time expenses (debt, renovation).
Talk to Our NMLS-Licensed Rate & Term Experts
Our team is committed to transparent, accurate guidance, backed by the authority of **Mortgage Preferred Partner**
