Rate-and-Term Refinance

A rate-and-term refinance swaps your current mortgage for a new one purely to change the interest rate, the loan term, or both, without pulling out cash. Because no equity leaves the property, lenders usually allow a higher loan-to-value than they would on a cash-out refinance.

The decision turns on simple break-even math: divide your closing costs by the monthly payment savings to see how many months it takes to come out ahead. Watch the term, too. Resetting back to a fresh 30-year loan can raise the total interest you pay over time even at a lower rate, because you stretch the payments out again.