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Rate And Term Refinance

What is 'Rate And Term Refinance'

The refinancing of an existing mortgage for the purpose of changing the interest and/or term of a mortgage without advancing new money on the loan. This differs from a cash-out refinance, in which new money is advanced on the loan. Rate and term refinances can carry lower interest rates than cash-out refinances.

Explaining 'Rate And Term Refinance'

Rate and term refinancing activity is driven primarily by a drop in interest rates, while cash-out refinance activity is driven by increasing home values. Because there are pros and cons associated with a rate and term and cash-out refinancing, the borrower must weigh the pros and cons of each before making any final decisions.


Further Reading


State of the Union: The Financial Crisis and the ECB's Response between 2007 and 2009
heinonline.org [PDF]
… In particular, the framework permits short-term interest rates to be changed, while keeping some … ECB Working Paper No. 926. ECB (2009) 'Recent Developments in the Retail Bank Interest Rate Pass-Through in the Euro Area'. Monthly Bulletin, August 2009, pp. 93-105 …

Lessons from the European economic and financial great crisis: A surveyLessons from the European economic and financial great crisis: A survey
www.sciencedirect.com [PDF]
… In particular, the framework permits short-term interest rates to be changed, while keeping some … ECB Working Paper No. 926. ECB (2009) 'Recent Developments in the Retail Bank Interest Rate Pass-Through in the Euro Area'. Monthly Bulletin, August 2009, pp. 93-105 …

Systematic mistakes in the mortgage market and lack of financial sophisticationSystematic mistakes in the mortgage market and lack of financial sophistication
www.sciencedirect.com [PDF]
… In particular, the framework permits short-term interest rates to be changed, while keeping some … ECB Working Paper No. 926. ECB (2009) 'Recent Developments in the Retail Bank Interest Rate Pass-Through in the Euro Area'. Monthly Bulletin, August 2009, pp. 93-105 …

The refinancing threshold pricing model: An economic approach to valuing MBSThe refinancing threshold pricing model: An economic approach to valuing MBS
link.springer.com [PDF]
… In particular, the framework permits short-term interest rates to be changed, while keeping some … ECB Working Paper No. 926. ECB (2009) 'Recent Developments in the Retail Bank Interest Rate Pass-Through in the Euro Area'. Monthly Bulletin, August 2009, pp. 93-105 …

Systemic risk and the refinancing ratchet effectSystemic risk and the refinancing ratchet effect
www.sciencedirect.com [PDF]
… In particular, the framework permits short-term interest rates to be changed, while keeping some … ECB Working Paper No. 926. ECB (2009) 'Recent Developments in the Retail Bank Interest Rate Pass-Through in the Euro Area'. Monthly Bulletin, August 2009, pp. 93-105 …

Optimal mortgage refinancing with stochastic interest ratesOptimal mortgage refinancing with stochastic interest rates
onlinelibrary.wiley.com [PDF]
… In particular, the framework permits short-term interest rates to be changed, while keeping some … ECB Working Paper No. 926. ECB (2009) 'Recent Developments in the Retail Bank Interest Rate Pass-Through in the Euro Area'. Monthly Bulletin, August 2009, pp. 93-105 …

The mortgage refinancing decisionThe mortgage refinancing decision
heinonline.org [PDF]
… In particular, the framework permits short-term interest rates to be changed, while keeping some … ECB Working Paper No. 926. ECB (2009) 'Recent Developments in the Retail Bank Interest Rate Pass-Through in the Euro Area'. Monthly Bulletin, August 2009, pp. 93-105 …

The interplay of economic reforms and monetary policy: The case of the eurozoneThe interplay of economic reforms and monetary policy: The case of the eurozone
onlinelibrary.wiley.com [PDF]
… In particular, the framework permits short-term interest rates to be changed, while keeping some … ECB Working Paper No. 926. ECB (2009) 'Recent Developments in the Retail Bank Interest Rate Pass-Through in the Euro Area'. Monthly Bulletin, August 2009, pp. 93-105 …



Q&A About Rate And Term Refinance


What is rate and term refinancing?

Rate and term refinance is the refinancing of an existing mortgage for the purpose of changing the interest and/or term of a mortgage without advancing new money on the loan.

How does this differ from cash-out refinance?

Cash-out refinance involves giving more cash than what was originally borrowed while rate and term refinance involves changing only the interest rate or terms of a mortgage without giving any additional cash.

Why would someone want to do either one?

Someone may want to do either one because they can get lower rates with rate and term refinance or they can get some extra cash by doing a cash-out refinance.

What does it mean to advance new money on a loan?

To advance new money means to give more cash than what was originally borrowed.

Who are these options best suited for?

These options are best suited for people who have equity in their homes, but need lower rates or people who need extra cash from their home equity.

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