Rate-and-term refinance
Replacing the mortgage you have with a new one built around a different rate or term.
What it is
A refinance pays off your current mortgage with a new mortgage. A rate-and-term refinance is focused on changing the rate, the term or both, rather than taking equity out as cash. A lower monthly payment can come from a lower rate, a longer payoff period or both. Those are not the same result, so the useful comparison includes the closing cost, the new payoff date and the total cost over the time you expect to keep the loan.
Who it's for
- Homeowners checking whether a different rate changes the real cost enough
- Borrowers considering a shorter or longer payoff period
- Owners who want the new loan compared with simply keeping the current one
The essentials
A refinance is a new loan
It replaces the mortgage you have. It comes with new terms, a new closing and costs that need to earn their way back.
Lower payment can mean longer debt
Stretching the payoff period can reduce the monthly payment while increasing how long you pay. Check both outcomes before calling it a saving.
Your timeline decides the value
Closing costs only make sense if you keep the new loan long enough for the change to outweigh them. Use your likely timeline, not a permanent-home assumption.
Common questions
- Does a lower monthly payment mean the refinance saves money?
- Not by itself. The payment may be lower because the new loan runs longer. Compare closing costs, the new payoff date and the cost over the years you expect to keep it.
- Do I have to restart with a long loan term?
- No. Different terms may be available. The right one depends on the payment you can carry and how quickly you want the balance gone.
Source: CFPB mortgage key terms. Current program documents and the borrower's final disclosures control.
The CFPB source defines refinancing and explains that closing costs, fees and a longer term can change the real result. A current Loan Estimate controls the terms and costs of any specific offer.
Related programs
Cash-out refinance
Replacing your mortgage with a larger one and receiving part of the difference.
Home equity loans and HELOCs
Borrowing against equity you already have, as a lump sum or as a line you draw from.
Conventional loans
The standard purchase loan, and the one FHA usually gets measured against.
This page is general information about loan programs, not a commitment to lend or an offer of credit. Program availability, terms, and qualification depend on your situation and are subject to underwriting approval. Tareq Maayta, NMLS #1443073. Loans through Finance USA Corporation, NMLS #135625. Equal Housing Opportunity.