What Is A Rate and Term Mortgage Refinancing? Referred to as a “no-cash-out” refinancing, a rate and term refinancing involves the homeowner taking out a new mortgage to replace the old one, but they do not receive any cash back at closing.
- The goal of a rate-and-term refinancing is usually not to access property equity, but rather to reduce the interest rate or alter the loan terms (e.g., going from a 30-year to a 15-year loan term).
- In a rate-and-term refinancing, the homeowner does not get any cash at closing and the new mortgage amount is equal to the remaining amount on the old mortgage.
- Because it has less expenses and doesn’t raise the homeowner’s debt-to-income ratio, it’s a more cost-effective choice than a cash-out refinancing.
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It’s crucial to thoroughly weigh the advantages and disadvantages of a rate-and-term refinancing before deciding if it’s the best choice for your particular financial circumstances. To decide whether refinancing is worthwhile, it could be helpful to weigh the savings from a reduced interest rate against the associated costs.