Rate and Term Refinance: The Cost-Saving Refi Option
In this guide, we’ll explain what a rate and term refinance is, how it compares to other types of refis (like a cash-out refi or FHA streamline), and how to decide which option is best for your financial goals.
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What is a Rate & Term Refinance?
- A potentially lower monthly payment
- Reduced interest paid over the life of the loan
- The option to switch from a 30-year to a 15-year term (or vice versa)
Quick Answer
A rate and term refinance replaces your current mortgage with one that has better terms, whether that’s a lower rate, shorter/longer term, or both, without withdrawing your equity.
Why Consider a Rate and Term Refinance?
Here’s why homeowners choose rate & term refinances to build wealth through homeownership.
Reduce Monthly Mortgage Payments
The most common reason homeowners choose a rate & term refinance is to lower their monthly mortgage payment by lowering their loan’s interest rate.
Reduce the Total Cost of the Loan
By lowering the loan’s interest rate or shortening the term from 30 years to 15 years, homeowners will reduce the total cost of the loan by paying less interest over time.
Get a Better Loan Program
You can change your mortgage from an FHA loan to a conventional loan to remove mortgage insurance or unlock better terms.
Refinance Without Adding Additional Debt
Unlike a cash-out refinance, a rate & term refi typically doesn’t add to your debt load. You’re simply restructuring your existing loan.
Pro Tip
In most cases, you can roll your closing costs into the new loan amount, so you don’t have to pay them out of pocket.
Rate & Term Refinance Requirements in 2025
Credit Score
+620 FICO
Time Since Closing
Varies by lender, typically 6 months or 180 days after closing.
Loan-to-Value
95% LTV required by some lenders
Debt-to-Income Ratio
Typically 43% or lower
Compare Rate & Term Refi vs. Cash-Out Refi & FHA Streamline
Rate & Term Refinance
Cash-Out Refi
FHA Streamline Refi
Should I refinance from an FHA loan to a conventional loan?
If you already have an FHA mortgage and want a fast refi process, an FHA streamline is probably best for you. However, if you have a lot of equity, strong credit, and want to avoid FHA mortgage insurance, a conventional rate & term refi could provide more savings long-term.
Should you refinance?
Refinancing can help you save on your mortgage or turn equity into cash in your pocket. Plug in your info below to see your options.
Monthly Savings
$0
Total Savings
$0
The UMortgage mortgage calculators are for estimation purposes only. This is not a commitment to lend. For an exact quote based on your individual financial circumstances, please contact us.
How to Apply for a Rate & Term Refi with UMortgage
Get a Custom Refi Review
We’ll review your current mortgage, interest rate, and goals to see if refinancing makes sense for you.
Choose Your Loan Terms
Pick a fixed rate, loan term, and loan type that aligns with your goals.
Upload Required Docs
You’ll submit your mortgage statement, income info, and possibly an appraisal, depending on your loan type.
Close & Enjoy Your New Terms
We’ll handle the paperwork and make the transition from your old loan to your new one seamless.
Frequently Asked Questions about Rate & Term Refinances
Answers to the most common questions we get from clients about rate & term refis.
Here's Why UMortgage is Your Best Choice
Relationships, Not Transactions
We’re here for more than just your mortgage. We’ll stick with you beyond closing to help you gain financial freedom through homeownership.
Local & Nationwide Expertise
With licensed loan officers across the country and deep knowledge of your local market, we’ll help you buy with confidence anywhere you call home.
Fast, Transparent Closings
We communicate with you every step of the homebuying or refinance process so you can close quickly without any hidden fees or surprises.