Rate Reduction

Rate and Term Refinance

A rate and term refinance is when homeowners choose to take advantage of the current interest rates by paying of their existing mortgage loan or loans and starting over with a new mortgage which typically has a lower rate of interest than their current home loan.

In addition to reducing one’s interest rate, some homeowners choose to reduce the term of the repayment of the loan from 30 years to 15 or even 10 years.  Naturally the reduction in the required total payments increases the amount necessary to meet the new minimum payment but for many, the lower interest rate of the current market and for the shorter term significantly offsets the otherwise increased principal portion of the new monthly loan obligation.

Individuals who opt for a rate and term refinance frequently pay off their adjustable rate mortgage (ARM) with a new fixed rate loan.  Although the rate homeowners locked on their ARM was lower than the fixed rates of the time, today’s market is so dramatically lower than it ever has been that individuals are often able to convert an adjustable rate mortgage to a fixed rate lower than the previous ARM rate.  Thus providing an overall lower payment and a secure fixed rate that will never change.