What is a Rate-and-Term Refinance?
Summary: A rate-and-term mortgage refinance allows homeowners to change their interest rates or their loan terms of an existing home loan mortgage. Mortgage refinances are great to take advantage of when interest rates are low or when switching over to a fixed rate loan from an adjustable rate loan (ARM).
A rate-and-term mortgage refinance allows homeowners to change their interest rates and/or shorten the loan term of an existing home loan mortgage. The previous mortgage amount is paid off and the owner makes payments towards the new amount.
Rate-and-term refinance is different than a cash-out refinance. Both forms of refinancing allow homeowners to change their interest rates or adjust their loan term, but homeowners with a cash-out refinance can cash-out the difference between the previous and new mortgage.
How do you do a mortgage refinance? The process is similar to a home purchase. Refinance lenders will ask for a handful of documents to get you the best rate possible. Some documents you may come across are recent pay stubs, bank statements, and W-2s for salaried homeowners.
Similar to other refinances, a rate-and-term refinance holds great benefits. Homeowners can:
- Lower their interest rate
- Reduce their monthly payment
- Change their loan term
- Switch to a different loan type
A rate-and-term refinance can be done at any time, however certain situations may be more beneficial than others. Mortgage refinances are great to take advantage of when interest rates are low, allowing lower monthly payments, or when switching loan types.
For more information, chat with us at callhallfirst.com or give us a call at 866-Call-Hall.