A Rate and Term Refinance (Rate/Term Refi) mortgage is a type of mortgage refinancing that focuses on changing the interest rate, loan term, or both without taking out cash from the home’s equity. Here’s a brief description of a Rate and Term Refi mortgage:

1. **Purpose:** The primary purpose of a Rate and Term Refi mortgage is to modify the terms of the existing mortgage to potentially lower monthly payments, reduce the total interest paid over the life of the loan, or adjust the loan structure to better suit the borrower’s financial goals.

2. **Interest Rate Modification:** In a Rate and Term Refi, borrowers can secure a new interest rate that is lower than their current rate, which can result in lower monthly mortgage payments. This is particularly beneficial when market interest rates have decreased since the original mortgage was obtained.

3. **Loan Term Adjustment:** Borrowers can also use a Rate and Term Refi to change the loan term. For example, they may switch from a 30-year mortgage to a 15-year mortgage to pay off the loan more quickly and potentially save on interest costs over time. Alternatively, they may extend the loan term to reduce their monthly payments.

4. **Cash-Out Not Allowed:** Unlike a Cash-Out Refinance, a Rate and Term Refi does not allow borrowers to receive cash from the equity in their home. The new loan amount is limited to the remaining balance of the existing mortgage, plus any associated closing costs and fees.

5. **Qualification:** Borrowers typically need to meet lender requirements, including creditworthiness and income verification, to qualify for a Rate and Term Refi. Lenders may also consider the loan-to-value ratio (LTV), which compares the new loan amount to the appraised value of the property.

6. **Closing Costs:** Just like with an initial mortgage, a Rate and Term Refi involves closing costs, which can include application fees, appraisal fees, title insurance, and more. Borrowers should consider these costs when evaluating the benefits of refinancing.

7. **No Additional Liens:** When refinancing, borrowers cannot add additional liens or debts to the mortgage; the new loan simply replaces the existing one with revised terms.

Rate and Term Refinancing can be a useful financial strategy for homeowners looking to take advantage of lower interest rates, shorten or extend their loan term, or align their mortgage with their changing financial circumstances. It’s important for borrowers to carefully evaluate their objectives and work with a qualified lender to determine the most appropriate refinancing option for their needs.