Rate-and-Term Refinance
What Is a Rate-and-Term Refinance?
A rate-and-term refinance allows you to replace your current mortgage with a new loan featuring better terms—typically a lower interest rate, a shorter payoff period, or both.
Unlike cash-out refinances, this option focuses solely on improving your mortgage structure, helping homeowners lower monthly payments, reduce total interest paid, or move into a more stable loan program.
Whether your goal is to save more each month or pay off your home faster, a rate-and-term refinance is one of the simplest and most cost-effective refinance options available.
Benefits of a Rate-and-Term Refinance
✔ Lower Your Interest Rate
Lock in a lower rate to reduce the amount you pay over the life of your loan.
✔ Lower Your Monthly Payment
Lower rates and better loan terms often result in more affordable monthly payments.
✔ Shorten Your Loan Term
Move from a 30-year to a 20- or 15-year term to pay off your home sooner and save thousands in long-term interest.
✔ Switch From Adjustable to Fixed Rates
Secure stability by converting from an ARM to a fixed-rate mortgage.
✔ Remove PMI (Private Mortgage Insurance)
If you have enough equity, refinancing into a new loan can eliminate monthly mortgage insurance costs.
✔ No Cash Needed at Closing
Most borrowers can roll closing costs into the loan for a zero-cash-to-close option.
Rate-and-Term Refinance Eligibility Requirements
Requirements vary by loan type, but most homeowners will need:
1. A Stable Payment History
Recent on-time mortgage payments are essential.
2. Acceptable Credit & Income
Better credit typically means better refinancing terms.
3. Sufficient Home Equity
Most programs require equity to qualify, especially if you’re removing mortgage insurance.
4. Verification Documents
Standard items such as pay stubs, tax returns, and bank statements (unless using specialty loans).
5. Home Appraisal (Most Cases)
An updated appraisal verifies your property value.
How the Rate-and-Term Refinance Process Works
Step 1: Review Your Current Loan
We analyze your rate, payment, equity, and potential savings.
Step 2: Choose Your New Loan Terms
Select your rate, loan term, and structure.
Step 3: Provide Documentation
Submit income and asset documents to confirm eligibility.
Step 4: Appraisal & Underwriting
Your home is evaluated (if required), and the file goes through underwriting.
Step 5: Close on Your New Loan
Finalize the new mortgage and start enjoying improved loan terms.
Who Should Consider a Rate-and-Term Refinance?
Choose this refinance if you want to:
- Lower your monthly payment
- Reduce the amount of interest you pay long-term
- Pay off your home faster
- Switch out of an FHA loan to remove mortgage insurance
- Replace an adjustable-rate mortgage
- Improve your rate after a credit score increase
Rate-and-Term Refinance FAQs
How much can I save with a rate and term refinance? It depends on how much your rate drops and what term you choose. On a $300,000 loan, dropping your rate by just 1% saves you around $175 a month and over $60,000 over the life of a 30 year loan. The best way to know your exact savings is to run the numbers with your current balance, rate, and remaining term against what you can qualify for today. We do that for free and can usually give you a clear picture within a few minutes.
Will my loan term reset back to 30 years? Only if you want it to. You can refinance into almost any term including 10, 15, 20, or 30 years. A lot of borrowers who have been in their loan for several years choose to refinance into a shorter term so they are not extending their payoff date. For example if you have 22 years left on a 30 year mortgage you might refinance into a 20 year term at a lower rate and actually pay less per month while still paying the house off sooner.
Does a rate and term refinance give me cash back? No. A rate and term refinance strictly changes your interest rate, your loan term, or both. If you want to pull cash out of your equity that would be a cash out refinance which is a different product. We offer both so if you are not sure which one fits your situation just give us a call and we can walk you through it.
How long does a rate and term refinance take to close? Most rate and term refinances close in 15 to 25 days. At Bonelli Financial Group we specialize in fast closings and in many cases can move faster than that. The timeline depends on how quickly we can get an appraisal scheduled and how fast your documents come in. The more responsive you are with paperwork the faster we can close.
Can I remove mortgage insurance with a rate and term refinance? Yes and this is one of the most common reasons people refinance even when rates have not dropped significantly. If you originally bought with less than 20 percent down and your home has appreciated or you have paid down enough principal to cross the 20 percent equity threshold, a rate and term refinance into a conventional loan can eliminate your PMI entirely. For some borrowers the PMI savings alone justify the refinance even without a rate improvement.
When does a rate and term refinance make sense? It makes sense when current rates are meaningfully lower than your existing rate, when you want to switch from an adjustable rate to a fixed rate for long term stability, when you want to shorten your loan term and build equity faster, or when you want to remove mortgage insurance. A good rule of thumb is that if you can drop your rate by at least 0.5 to 0.75 percent and you plan to stay in the home long enough to break even on the closing costs, it is worth doing. We can run a break even analysis for you so you know exactly when you start saving.
What is the difference between a rate and term refinance and a cash out refinance? A rate and term refinance only changes your interest rate, your loan term, or both. Your loan balance stays roughly the same. A cash out refinance replaces your mortgage with a larger loan and gives you the difference in cash. If your goal is just to lower your payment or pay off the home faster, rate and term is the right move. If you need access to your home equity for renovations, debt consolidation, or another purpose, cash out is what you want. We can help you with both.
Does a rate and term refinance require an appraisal? In most cases yes, though some loan programs allow appraisal waivers depending on your equity, loan type, and lender. An appraisal confirms your home's current value which also determines how much equity you have and whether you qualify to remove mortgage insurance. We will let you know upfront whether your situation qualifies for a waiver so there are no surprises.
What credit score do I need to refinance? For a conventional rate and term refinance most lenders want to see a minimum credit score of 620, though better rates are available at 740 and above. FHA refinances can go lower in some cases. Your credit score directly affects the rate you qualify for so if your score has room to improve it is sometimes worth waiting a few months before refinancing to lock in a better rate. We can look at your full picture and advise on the best timing.
Are there closing costs on a rate and term refinance? Yes. Closing costs on a refinance typically run between 2 and 5 percent of the loan amount. However you have options. You can pay them out of pocket, roll them into the loan balance, or in some cases accept a slightly higher rate in exchange for a lender credit that covers the costs. We walk through all three scenarios with every borrower so you can decide what makes the most financial sense for your situation.
A rate-and-term refinance can help you lower your payment, reduce interest, and strengthen your financial future.
Get your free refinance review today and see how much you can save.
