A rate-and-term refinance lets you change the term of your original mortgage or interest of your loan, or both. This gives you options to lower your rate, bring in cash to lower your principal loan balance, or pay off your loan faster. This differs from a cash-out loan because you will not receive cash at the close of the loan.
A rate-and-term refinance delivers a great option if you’re wanting to lower your interest rate or lower your monthly obligation. You can also refinance to shorten the life of your mortgage or pay off debts faster.
Reasons to utilize rate-and-term:
- Rates have dropped and you want to take advantage of lower interest payments.
- Consolidating a first and purchase money second could save you monthly.
- You may want to lower your mortgage term to pay off your mortgage faster and pay less interest for the life of the loan.
- Your credit score has increased since you first purchased your home allowing you to secure a better interest rate.
- You want to eliminate private mortgage insurance (PMI) and the value of your home has increased to no longer require it.
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