Refinancing for the same balance — just better rate or term.
A rate-and-term refinance pays off an existing mortgage with a new one of essentially the same balance, with the goal of changing the interest rate, the amortization term, or both. Unlike a cash-out refinance, no cash is returned to the borrower — the new loan replaces the old one with improved terms.
Rate-and-term refis serve specific purposes. The most common is rate reduction — refinancing into a lower rate when market rates have fallen significantly. The math: divide closing costs by the monthly P&I savings; if the result (the "break-even") is shorter than expected hold, the refi makes sense. Term restructuring is another use — moving from a 15-year amortization to 30-year to improve cash flow, or vice versa to accelerate payoff.
Rate-and-term refis have higher max LTV than cash-out because the loan isn't increasing exposure — it's replacing existing debt. Conventional rate-and-term goes up to 80% LTV (vs 75% on cash-out). DSCR rate-and-term goes up to 80% LTV (vs 75% on cash-out). Commercial rate-and-term often matches the original loan's LTV.
Seasoning rules are looser. Most rate-and-term refis can be done with no minimum seasoning — the borrower can refi as soon as the prepayment penalty on the existing loan allows. This is the key difference from cash-out, which typically requires 6 months minimum seasoning before using new appraised value.
For investors, rate-and-term is the tool for locking in improved rates when markets shift, restructuring amortization when cash flow needs change, and exiting prepayment penalties on existing loans before maturity. It's a pure financing optimization play — no equity extraction, just better terms.
| Existing loan: $385,000 @ 8.25% | |
| Existing monthly P&I (30 yr) | $2,891 |
| New loan: $385,000 @ 6.75% | |
| New monthly P&I (30 yr) | $2,497 |
| Monthly P&I savings | $394 |
| Annual savings | $4,728 |
| Closing costs (rolled in) | $8,500 |
| Break-even months | 21.6 months |
Refinancing an existing loan with a new one of essentially the same balance, with the goal of improving the rate, term, or amortization — without taking cash out.
Generally yes — higher max LTV, looser seasoning rules, slightly tighter rate, and simpler underwriting. The lender isn't increasing exposure, just replacing existing debt.
Divide closing costs by monthly P&I savings. Result is the break-even in months. If you'll hold the loan longer than break-even, the refi makes sense. Typical break-even is 18–36 months on a meaningful rate reduction.
Yes — most refinances allow closing costs to be added to the new loan amount, eliminating out-of-pocket cost. Slightly increases the loan balance but avoids fronting the cash.
DSCR: 21–30 days. Conventional: 30–45 days. Commercial: 45–75 days. Roughly the same as a purchase loan or cash-out refi.
Matrix structures rate-and-term refinances on rental, bridge, and commercial loans. Lower rates, better terms, fast execution.
