Rate-and-Term Refinance
Direct definition
A refinance that changes rate, term, or both without pulling significant cash out.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
Rate-and-term is used to lower rate, shorten term, or convert an ARM to fixed. Cash back is generally limited to a small amount.
Why it matters
It's the cleanest way to reduce interest cost or restructure the loan.
Where you may see it
- Loan Estimate
- Closing Disclosure
- Refinance application
A real-world example
You refinance a 7% loan to 5.75% at the same balance, saving about $150/month with no cash out.
Educational and illustrative only
A common misunderstanding
A rate-and-term refinance isn't the same as a cash-out refinance — it's designed to adjust loan terms, not to access equity as cash.
Ask Vabasso AI
This glossary provides general educational information. Mortgage terminology, qualification methods, forms, timelines, fees, program rules, and legal meanings may vary by lender, investor, loan program, property, occupancy, state, and transaction. Definitions do not represent loan approval, legal advice, tax advice, or a commitment to lend.
- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026