Rate-and-Term Refinance
If the rate-and-term refinance is on your radar for 2026, here is how it works, who it fits, and what to watch for.
How it works
A rate-and-term refinance replaces your existing mortgage with a new one to lower your rate, change your term, or both - without taking cash out. It's the most common refinance, used to cut payments, shorten payoff, or swap an adjustable rate for a fixed one. Conventional rate-and-term reaches up to 95-97% LTV and generally needs a 620+ score.
Key things to know
- Weigh the new rate and term against your current loan — a refinance resets the clock.
- Budget 2-5% of the balance in closing costs (or roll them in for a higher rate).
- Find your break-even: costs divided by monthly savings.
- Cash-out is capped at 80% LTV conventional/FHA; VA cash-out can reach 100%.
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Frequently Asked Questions
- What is the rate-and-term refinance?
- A rate-and-term refinance replaces your existing mortgage with a new one to lower your rate, change your term, or both - without taking cash out. It's the most common refinance, used to cut payments, shorten payoff, or swap an adjustable rate for a fixed one. Conventional rate-and-term reaches up to 95-97% LTV and generally needs a 620+ score.
- What does it cost?
- Most refinances run 2-5% of the loan in closing costs. A no-closing-cost version trades those fees for a slightly higher rate.