Rate-and-term refinance
A refinance that changes the rate, the loan length, or both, without pulling cash out. Usually done to lower the payment or shorten the loan.
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Part 1 of 4
Why a seller cares
A rate-and-term refinance replaces your loan with a cheaper or shorter one and takes no cash out. It is the alternative to selling for a homeowner who wants a lower payment but likes the house.
Part 2 of 4
A simple example
Instead of selling, you refinance $200,000 from 7.2% to 6.1%. The payment drops about $145 a month and the balance stays the same.
| The choice | What changes |
|---|---|
| Rate-and-term refinance | The rate or the term; the balance stays |
| Cash-out refinance | The balance grows and you take the difference |
| Selling | The loan is paid off and the equity becomes cash |
Rate-and-term keeps the house and changes the loan.
Part 3 of 4
What people get wrong
That refinancing is free. Closing costs on a refinance are real, and they are why a small rate drop does not always pay.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
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