Situation
Rate and term refinance
Lower the rate, shorten the term, or drop mortgage insurance, without taking cash out and without quietly restarting a thirty-year clock.
The honest bitThe break-even month is the only number that matters, and it is not the one most lenders lead with. If you plan to move in three years, a 34-month break-even is a loss.
What this programme actually is
A rate and term refinance replaces your existing loan with a new one at a different rate, a different term, or both. No cash comes back to you beyond a small rounding allowance, which is why it prices better than a cash-out.
The arithmetic is simple and almost nobody does it properly. Total the closing costs, divide by the monthly saving, and you have the break-even month. If you will still own the house well past that month, the refinance pays. If you will not, it does not, however good the rate sounds.
The second arithmetic problem is the term. Refinancing a loan with 23 years left into a fresh 30-year mortgage lowers the payment partly through the rate and partly by stretching the debt out another seven years. Our break-even model shows both the payment saving and the lifetime interest change, so you can see which is doing the work.
Rate and term refinanceWhat is included when I run it
- A break-even model on paper: costs, monthly saving, the exact month you turn positive
- A term-preserving option quoted alongside the fresh 30, so the clock is not reset by accident
- Lifetime interest compared between the current loan and each option
- PMI removal tested as an alternative, since a new appraisal is sometimes cheaper than a new loan
- Lender credit options priced at par, at a credit, and at a buydown
- Escrow refund timing explained, so the first month after closing does not surprise you
How the file moves
- 01Current loan auditRate, balance, remaining term, escrow balance and any prepayment terms.
- 02Break-even modelRun before an application, not after. If it does not pay, we say so.
- 03Value checkAutomated valuation first. A full appraisal only where the waiver does not come through.
- 04Lock and discloseRefinances carry a three-business-day right of rescission on a primary residence.
- 05Title and payoffPayoff demand ordered with good-through dates that cover the closing.
- 06FundingFunds disburse on the fourth business day after signing. Keep paying the old loan until you see it close.
Why people choose it
No cash out means better pricing
Cash-out carries its own price adjustments. Rate and term does not.
Shortening the term is often free
A 20-year rate is usually below a 30-year rate, so part of the higher payment is paid for by the rate itself.
PMI can come off
If the value has moved, dropping mortgage insurance alone can beat a rate change.
Appraisal waivers are common
Under 80% LTV with a clean file, value acceptance saves roughly $650 and about a week.
What moves your price
| Factor | How it behaves |
|---|---|
| Closing costs | Title, recording, appraisal and lender fees. Virginia recordation tax applies to the new deed of trust. |
| Remaining term | The most overlooked variable. Compare like for like. |
| Escrow | Your old escrow is refunded, but you fund a new one at closing. Plan for the overlap. |
| Break-even month | Costs divided by monthly saving. Compare it honestly against how long you will stay. |
Answers
Rate and term refinance: common questions
Something not covered here? Call (804) 555-0146 and ask.
There is no universal number. A large balance can justify a quarter-point move; a small balance may not justify a full point. Run the break-even; that is the answer.
Yes. We can write a 23-year custom term, or use a 25-year product, so the loan finishes when the original would have. Ask for it, because it is rarely offered.
It looks that way because interest is paid in arrears and the payoff includes accrued interest. You are not saving a payment; you are financing it.
On a refinance of a primary residence you have three business days after signing to cancel. Funds do not disburse until that window closes.
Is this the right programme for you
Twenty-five minutes on the phone will settle it. If a different programme is cheaper for your file, I will say so.
Three wholesale quotes on the same day's pricing, before you choose.