Rate-and-term refinance.

In plain English

A rate-and-term refinance swaps your existing mortgage for a new loan with a different interest rate, a different term, or both, while keeping the balance roughly the same. People do it to lower the rate, switch from an adjustable to a fixed rate, or change how many years are left. Unlike a cash-out refinance, you do not borrow against your equity, so the new balance stays close to the old one. Refinancing has closing costs, and it resets the loan's clock, so the break-even point, how long until the monthly savings cover those costs, decides whether it pays.

01Why it matters

A rate-and-term refinance can cut your payment or interest, but the closing costs and the reset clock mean it only pays if you keep the loan past the break-even point.

02The math, step by step

Refinancing a 300,000 dollar balance from 7 percent to 6 percent lowers the payment by roughly 200 dollars a month. If closing costs are 6,000 dollars, you break even in about 30 months.

03What this is NOT

04Receipts

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