DEFINITION of 'Rate And Term Refinance'

The refinancing of an existing mortgage for the purpose of changing the interest and/or term of a mortgage without advancing new money on the loan. This differs from a cash-out refinance, in which new money is advanced on the loan. Rate and term refinances can carry lower interest rates than cash-out refinances.

BREAKING DOWN 'Rate And Term Refinance'

Rate and term refinancing activity is driven primarily by a drop in interest rates, while cash-out refinance activity is driven by increasing home values. Because there are pros and cons associated with a rate and term and cash-out refinancing, the borrower must weigh the pros and cons of each before making any final decisions.

RELATED TERMS
  1. Refinance Wave

    A situation where a large amount of mortgage refinancing occurs ...
  2. Involuntary Cash-Out

    Distributing the balance of a participant's retirement account ...
  3. No-Appraisal Refinancing

    A type of mortgage for which the lender does not require an independent, ...
  4. Purchase Mortgage Market

    A mortgage market for home financing transactions. The primary ...
  5. No-Appraisal Mortgage

    A type of home loan used for refinancing for which the lender ...
  6. Interest Rate Reduction Refinance ...

    A mortgage refinancing program offered by the U.S. Department ...
Related Articles
  1. Personal Finance

    Refinancing Mortgages: Cash Out Vs. Rate/Term

    Understanding the pros and cons of each type of mortgage loan.
  2. Personal Finance

    Should You Refinance Your Mortgage When Interest Rates Drop?

    Refinancing is a great way for many homeowners to improve their financial situation - but beware of the downsides.
  3. Investing

    Should You Refinance Your Home if You're Over 50?

    Whether you should refinance your mortgage or not depends on your savings but for people over the age of 50 there are other specific factors to consider.
  4. Personal Finance

    9 Things to Know Before You Refinance Your Mortgage

    Whether or not a mortgage refinance is right for you depends more on individual circumstances than this week's mortgage interest rates.
  5. Investing

    When Does It Pay to Refinance Your Mortgage?

    Mortgage interest is among a homeowner’s biggest expenses, so refinancing is a popular way to lower costs, but it doesn’t always make sense.
  6. Personal Finance

    Refinancing vs. a Home-Equity Loan: How to Decide

    If you want to pay off debt, make home improvements or just get a better interest rate, you need to know exactly what these terms mean.
  7. Personal Finance

    6 Questions to Ask Before You Refinance

    Refinancing your mortgage can be a quick way to save on payments, but it's not for everyone.
  8. Retirement

    Business Owners: Rules For Qualified Retirement Plans

    Business owners need to take note of how they handle qualified-plan distributions to former employees.
  9. Personal Finance

    Refinancing Student Loans: 5 Questions to Ask

    Refinancing can be a great way to consolidate your student loans, but there are lots of questions you'll need to ask yourself before you start the process.
  10. Personal Finance

    Student Loan Refinancing: The Pros and Cons

    To refinance your student loan or not? Here are the top pros and cons to consider.
RELATED FAQS
  1. How do I know if I should refinance my mortgage?

    If you can reduce your current interest rate by 0.75-1% or higher then it might make sense to consider a refinancing move. ... Read Answer >>
  2. Can FHA loans be refinanced?

    Learn whether an FHA loan can be refinanced, find out what types of FHA loan refinancing are available and understand the ... Read Answer >>
  3. How does refinancing my mortgage affect my FICO score?

    Learn some of the ways refinancing your mortgage could impact your FICO credit score, especially if you have held your current ... Read Answer >>
  4. When would a corporation want to refinance its debt?

    Favorable market conditions or the strengthening of a company's credit rating may lead to the refinancing of corporate debt. ... Read Answer >>
Trading Center