A rate-and-term refinance is an important way to save money on your mortgage. It refers to a process that alters or replaces an existing mortgage loan’s interest rate, typically without providing the borrower with new money. This type of refinance is often done in response to a drop in the prevailing interest rate environment, allowing borrowers to secure a lower interest rate than what they currently have on their mortgage.

One of the most attractive benefits of rate-and-term refinances is that they typically provide an immediate benefit in either reduced monthly payments or lower interest expenses. This can be especially attractive given the current low interest rate climate. Being able to secure a lower rate on your mortgage may mean that you are able to save on your monthly payments and/or total interest costs over the course of your loan.

In order to qualify for a rate-and-term refinance, you typically need to have a good credit score and a demonstrated history of responsible financial behavior. Additionally, lenders may be more likely to approve a rate-and-term refinance if your current loan’s equity is enough to cover the costs associated with your new loan.

In addition to the potential lower interest rate, pursuing a rate-and-term refinance gives you the option to change the terms of your loan to better fit your financial needs. This could include increasing or decreasing the time you have to pay off the loan, changing the frequency of your payments from an adjustable rate loan to a fixed rate loan, and restructuring your principal and interest payments.

In a nutshell, a rate-and-term refinance gives you the opportunity to get a better deal on your mortgage and alter the terms to suit your needs. While it’s important to thoroughly research the various refinancing options to decide if it’s right for you, a rate-and-term refinance can help you capitalize on market conditions, potentially save you a great deal of money in the long run, and give you increased flexibility in the life of your loan.