Rate and Term Refinance: Restructuring Your Mortgage
Learn how refinancing can help you take control of your finances by restructuring your mortgage with a rate and term refinance. Understand the process to make a smart decision for your unique situation.
Understanding Rate and Term Refinance
Rate and term refinance is an option to restructure an existing mortgage loan by replacing the old loan with a new loan that has a lower interest rate, lower monthly payments, and/or a longer term. It is also known as a “no-cash-out” refinance because the purpose of the loan is to lower your payments and improve your overall loan terms, not to take cash out from your equity.
Benefits of a Rate and Term Refinance
Rate and term refinance offers many benefits. It can help you save money on interest over the life of the loan, lower your monthly payments, and allow you to pay down your loan principal faster. Additionally, it can help you build additional equity in your home when it compensates for a higher interest rate on the old loan.
Considerations Before Refinancing
It's important to understand the process and costs associated with a rate and term refinance to make sure it's a worthwhile option for you. To begin your research, consider the following:
- Monthly interest rate savings
- Total closing costs
- Loan term length and potential fees for early retirement
- Existing loan's pre-payment penalty rules
- Are you likely to move before you have paid off the loan?
Final Thoughts
Rate and term refinance offers many potential benefits, but it's important to do your due diligence to accurately weigh the costs and benefits. Consider utilizing the services of a mortgage professional to assist you in the process.