Rate-and-Term Refinance in Tennessee

What is a rate-and-term refinance?

A rate-and-term refinance replaces your existing mortgage with a new one at a different interest rate, a different term, or both. No cash is taken out beyond what's needed to cover closing costs. The goal is to improve your loan's economics — lower monthly payment, less total interest, or faster payoff.

Common scenarios

• Rate drop: Rates have fallen since you got your loan. Refinancing to a lower rate reduces your monthly payment and total interest paid.
• ARM to fixed: You have an adjustable-rate mortgage and want the stability of a fixed rate before your adjustment period begins.
• 30-year to 15-year: You want to pay off your home faster and can afford the higher payment. A 15-year mortgage typically carries a lower rate than a 30-year.
• Remove FHA mortgage insurance: Your home has appreciated to where you have 20% equity. Refinancing to a conventional loan eliminates FHA's lifetime MIP.
• Remove a co-borrower: After a divorce or other change, refinancing removes a co-borrower from the loan and title.

The break-even point

Refinancing has closing costs — typically 2–4% of the loan amount. Before refinancing, calculate how long it takes for the monthly savings to recoup those costs. If you plan to stay in the home longer than the break-even period, refinancing makes financial sense.

Use the Refinance Break-Even Calculator to run your specific numbers.

Qualification requirements

Rate-and-term refinances require a credit review, income verification, and typically a new appraisal. Qualification standards are similar to a purchase loan. Most lenders require at least 3–5% equity in the home (95–97% LTV maximum for conventional; 97.75% for FHA).