Rate And Term Refinance

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.

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RELATED FAQS
  1. How do I know if I should refinance my mortgage?

    The typical rule of thumb is that if you can reduce your current interest rate by 0.75-1% or higher then it might make sense ... Read Answer >>
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    Learn whether an FHA loan can be refinanced, find out what types of FHA loan refinancing are available and understand the ... Read Answer >>
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