Financing
Rate-and-term refinance
A rate-and-term refinance replaces an existing mortgage mainly to change the interest rate, loan term, or both rather than to extract material equity as cash.
Glossary
Financing
What is a rate-and-term refinance?
Primary references on this page:
·
CFPB mortgage key terms: mortgage refinance“Rate-and-term” is useful consumer shorthand, but agency and lender classifications can use terms such as limited cash-out or no cash-out and apply detailed rules. Compare total financing cost and remaining balance over the time you expect to keep the loan, not just the new monthly payment.
How rate-and-term refinance works
Document the existing payoff, new loan amount, closing costs, financed costs, credits, any cash back, old remaining term, new term, and a common comparison horizon. A longer new term can reduce the payment while increasing the time debt remains outstanding.
Formula: simple break-even months = upfront refinance costs ÷ monthly payment reduction; also compare interest plus costs and remaining balances over the same horizon
Worked example
A refinance that costs $6,000 and reduces the payment by $200 has a simple 30-month cost-to-payment break-even. That does not prove savings: compare the balances and interest through month 30 and your expected hold period.
Common mistakes and review checks
Treat the result or document as one input to a decision. Verify the current source document, definitions, dates, and transaction facts before relying on it.
This is general educational information, not legal or tax advice. Rules vary by state and locality and change over time — check your local law and confirm specifics with a qualified professional.