Interest Rate
Compare the proposed rate with the current rate while accounting for points, lender credits, costs and the type of mortgage.
CHANGE THE RATE, PAYMENT OR TERM
Rate-and-Term Refinance
A rate-and-term refinance replaces your current mortgage without using the new loan primarily to receive cash. The objective may be to change the interest rate, monthly payment, repayment period or loan structure.
- 29 years of mortgage experience
- Complete loan comparisons
- Clear review of costs and tradeoffs
THE SHORT ANSWER
What Is a Rate-and-Term Refinance?
A rate-and-term refinance is designed primarily to change the financing terms of an existing mortgage. Depending on the available program and qualification requirements, the new loan may change the rate, payment, repayment period or loan type.
Unlike a cash-out refinance, accessing equity is not the primary purpose. Limited cash adjustments may still occur as part of paying off the existing mortgage and completing the transaction.
A lower interest rate does not automatically make the entire loan less expensive.
Closing costs, the new repayment period, the new balance and how
long you keep the mortgage all affect the practical result.
THREE CONNECTED DECISIONS
Rate, Payment and Term Should Be Reviewed Together
Changing one part of the mortgage can affect the others. The best structure depends on the outcome you want the new loan to support.
Monthly Payment
Review principal and interest along with applicable taxes, insurance, mortgage insurance and other housing expenses.
Loan Term
A shorter or longer repayment period can change the payment, payoff timeline and potential interest paid over time.
UNDERSTAND THE TRADEOFF
A Shorter and Longer Term Can Produce Different Results
The term should fit both the desired monthly payment and your expected time with the mortgage.
SHORTER REPAYMENT PERIOD
Potentially Accelerate the Payoff
- The required monthly payment may be higher
- Principal may be repaid more quickly
- Potential total interest may be lower
- The payment must remain comfortable for the household
- Other savings and financial priorities should be considered
LONGER REPAYMENT PERIOD
Potentially Adjust the Monthly Payment
- The required principal-and-interest payment may be lower
- The payoff timeline may be extended
- Interest may be paid over a longer period
- Restarting the term may affect long-term cost
- The new structure should support your actual objective
COMPARE THE COMPLETE NUMBERS
Do Not Evaluate the Refinance by Rate Alone
- Current and proposed interest rates
- Current and proposed monthly payments
- Remaining and proposed loan terms
- Closing costs, points and lender credits
- Current payoff and proposed new balance
- Estimated break-even timeline
- Mortgage-insurance changes, if applicable
- Expected time keeping the property and loan
RECOVERING THE COST
Estimate the Break-Even Timeline
Refinance Costs ÷ Estimated Monthly Savings
Approximate months needed to recover the costs
This simplified calculation is a planning tool, not a complete loan comparison.
COSTS STILL MATTER
A “No-Closing-Cost” Structure Is Not Necessarily Free
Some refinance structures may reduce the amount paid at closing through lender credits or by adding eligible costs to the new loan balance. The costs may still be reflected in the rate, loan amount or other terms.
- Ask which costs are being paid, credited or financed.
- Compare the rate with and without lender credits or points.
- Review whether the new balance includes transaction costs.
- Consider how long you expect to keep the new mortgage.
- Use the Loan Estimate to compare proposed scenarios.
The lowest amount due at closing is not automatically the least expensive option over time.
BEFORE CHOOSING A STRUCTURE
Five Questions to Ask About the Proposed Loan
QUESTION 1
What Is My Primary Goal?
Define whether the priority is the payment, payoff timeline, loan structure or another specific result.
QUESTION 2
What Will It Cost?
Review closing costs, points, lender credits, prepaid expenses and any amount added to the balance.
QUESTION 3
How Will the Term Change?
Compare the remaining term on the current mortgage with the full term of the proposed loan.
QUESTION 4
When Is Break-Even?
Estimate how long it may take for the expected monthly difference to recover the transaction costs.
QUESTION 5
How Long Will I Keep It?
Consider your expected timeline in the property and with the new mortgage before proceeding.
THE REVIEW PROCESS
From Current Mortgage to Proposed Refinance
The exact process varies, but a useful rate-and-term comparison generally follows these steps.
STEP 1
Review the Current Loan
Confirm the balance, payment, interest rate, remaining term and current mortgage structure.
STEP 2
Define the Objective
Identify the payment, term or structural change you want the new mortgage to accomplish.
STEP 3
Compare Scenarios
Review proposed rates, payments, terms, costs, balances and estimated break-even timelines.
STEP 4
Apply and Complete Review
Provide requested documentation and review the final disclosures before deciding whether to close.
CONTINUE YOUR RESEARCH
Related Refinance Guides
Should I Refinance My Mortgage?
Evaluate whether the goal, costs, timing and complete effect of refinancing support your current plan.
Review the Decision →Refinance Closing Costs
Understand common cost categories, lender credits and the role of break-even planning.
Understand the Costs →Cash-Out Refinance
Learn how accessing available equity changes the loan balance, payment and secured debt.
Explore Cash-Out Refinance →COMPARE THE COMPLETE LOAN
Ready to Review Rate-and-Term Refinance Options?
Start with a comparison of your current mortgage, proposed payment, loan term, costs and expected timeline.