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Torres & Co. Lending > Refinance Programs > Refinanciación de tipo de interés y plazo

Refinanciación de tipo de interés y plazo

Rate-and-Term Refinance

A Rate-and-Term Refinance is one of the most common types of refinances. It allows homeowners to replace their existing mortgage with a new loan that has a different interest rate, loan term, or both — without pulling out additional cash from equity. The goal is usually to lower monthly payments, pay off the loan faster, or switch from an adjustable-rate to a fixed-rate mortgage.

What Is a Rate-and-Term Refinance?

This type of refinance does not provide the borrower with cash out. Instead, it restructures the mortgage by changing the interest rate (to lower payments or secure a better rate) and/or the loan term (shortening or extending repayment time).

How It Works

  • Loan Amounts: Varies by program (Conventional, FHA, VA, or Jumbo).
  • Down Payment: Not required since you’re refinancing.
  • Credit Score Requirement: Typically 620+ for Conventional; FHA and VA may allow lower.
  • Appraisal: Often required unless exempt under streamline programs (FHA/VA).
  • Closing Costs: Usually 2%–5% of the loan amount (can be rolled into the loan in some cases).
  • Options Available:
    • Lower your interest rate.
    • Shorten your loan term (e.g., 30 years to 15 years).
    • Extend your loan term to reduce monthly payments.
    • Convert from an ARM to a fixed-rate mortgage.

Benefits of Rate-and-Term Refinance

  • Potentially lower your monthly mortgage payments.
  • Pay off your home faster with a shorter loan term.
  • Secure a more stable fixed-rate mortgage.
  • Opportunity to remove mortgage insurance (MI/PMI) if enough equity is built.
  • Can be combined with streamline programs for faster processing.

Fun Facts & Insider Details

  • Popular Choice: The majority of refinances in the U.S. are rate-and-term.
  • Equity Gains: Even without pulling cash out, refinancing can remove PMI once equity reaches 20%.
  • FHA-to-Conventional Strategy: Many FHA borrowers refinance into a Conventional loan once they have enough equity to eliminate FHA mortgage insurance.
  • ARM Reset Avoidance: Borrowers often refinance ARMs before the adjustable period begins.
  • 15-Year Savings: Switching from 30 years to 15 years may slightly raise payments but save tens of thousands in interest.

Who Is the Best Candidate for a Rate-and-Term Refinance?

  • Homeowners with higher interest rates than current market rates.
  • Borrowers who want to reduce their monthly payments.
  • Homeowners with equity who want to drop mortgage insurance.
  • Borrowers wanting to pay off their loan faster with a shorter term.
  • Homeowners looking to move from an ARM to a fixed-rate mortgage.

FAQs – Rate-and-Term Refinance

  • Yes. Some borrowers refinance just to shorten their loan term or remove mortgage insurance.

  • Yes, but in some cases they can be rolled into the new loan or offset with lender credits.

  • Usually, yes. However, FHA, VA, or Conventional programs sometimes allow appraisal waivers.

  • Most refinances close in 30–45 days, but streamline programs can be faster.

Next Step

Thinking about refinancing to a better rate or term? A Rate-and-Term Refinance may save you money each month and long-term.

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⚖️ Disclaimer: This guide is for educational purposes only. Loan approval and program eligibility depend on credit, income, assets, property type, and lender guidelines. Closing costs and appraisal requirements vary by program.

Torres & Co. LendingRefinanciación de tipo de interés y plazo