Rate-and-term refinance
What is rate-and-term refinance?
A rate-and-term refinance changes your interest rate, your loan term, or both, without increasing the amount you borrow beyond closing costs. No cash goes to the borrower.
How it is calculated
New loan amount = current payoff balance + (closing costs, if financed)
What it means in practice
This is the standard form of refinancing. The new loan amount equals your current payoff balance, plus closing costs if you choose to finance them rather than pay them at closing.
Lenders generally price rate-and-term refinances better than cash-out refinances, because the loan-to-value ratio does not increase and the borrower is not extracting equity.
Extending the term lowers the monthly payment but restarts the amortization clock, which can increase total interest even at a lower rate.