Refinance Program

Rate & Term Refinance:
Lower Your Rate, Shorten Your Term

A rate-and-term refinance replaces your existing mortgage with a new loan at a better rate, a shorter term, or both, without changing your loan balance. Mortgages by Channing closes them every day.

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✓ Lower your monthly payment✓ Shorten your loan term✓ Remove PMI or MIP✓ Switch loan types

The Basics

What Is a Rate-and-Term Refinance?

A rate-and-term refinance replaces your current mortgage with a new loan that has a different interest rate, a different loan term, or both, without changing your loan balance in any meaningful way. You're not pulling cash out. You're restructuring what you already owe to get better terms.

The most common scenario: rates drop, and refinancing into a lower rate reduces your monthly payment and total interest paid over the life of the loan. But rate isn't the only reason to refinance, switching from a 30-year to a 15-year, removing mortgage insurance, or converting an ARM to a fixed rate are all valid rate-and-term refinance goals.

620

Typical min. credit score

97%

Max LTV (conventional)

21 to 28

Days to close

Cash out at closing

Rate-and-term vs. cash-out, the key distinction

In a rate-and-term refinance, the new loan pays off the old loan and covers closing costs, nothing more. If you want funds beyond that, it becomes a cash-out refinance with different LTV limits and slightly higher rates. Rate-and-term is the cleaner, lower-cost option when your only goal is improving your loan terms.

Why Refinance

Common Rate-and-Term Refinance Goals

Rate-and-term refinances solve different problems depending on where you are in your homeownership journey. Here are the most common situations Mortgages by Channing sees.

Lower Your Interest Rate

The classic refi. If today's rate is meaningfully lower than what you're paying, refinancing reduces your monthly payment and total interest paid. Even a 0.75% rate drop on a $300,000 loan saves roughly $150/month and $54,000 in total interest over 30 years.

Shorten Your Loan Term

Refinancing from a 30-year to a 15-year loan builds equity faster and dramatically reduces total interest, even if your monthly payment increases. Many homeowners do this when income grows and they want to own their home outright sooner.

Remove PMI or MIP

If your home has appreciated and you now have 20%+ equity, refinancing to a new conventional loan eliminates PMI without waiting for your existing loan to amortize down. FHA borrowers often refinance to conventional specifically to eliminate MIP.

Convert ARM to Fixed

If you have an adjustable-rate mortgage approaching its adjustment period, refinancing into a 30-year or 15-year fixed locks in your rate and eliminates payment uncertainty, especially important if rates have moved significantly since you originated.

Switch Loan Programs

FHA to conventional (to remove MIP), conventional to VA (to eliminate PMI for eligible veterans), or any other program change where the new program offers better terms for your current situation.

Remove a Borrower

After a divorce or separation, refinancing into one person's name removes the other from the mortgage obligation. This is one of the most common non-rate reasons to do a rate-and-term refinance.

The Math

How to Calculate Your Break-Even Point

Every refinance has closing costs. The break-even point is how long it takes for your monthly savings to recover those costs. If you plan to stay in the home longer than the break-even period, refinancing makes financial sense.

Break-Even Example

Current monthly payment (P&I)

$1,850

New monthly payment after refi

$1,650

Monthly savings

$200/month

Estimated closing costs

$4,800

Break-Even Point

24 months

In this example, staying in the home longer than 2 years means the refinance pays off. Every month beyond that, you're ahead by $200. Over 5 years: $7,200 in savings after recovering closing costs.

Restarting the clock on your amortization

One cost of refinancing that doesn't show up in the break-even calculation: if you're 7 years into a 30-year loan and refinance into a new 30-year, you've reset your payoff timeline. Early mortgage payments are mostly interest, by restarting, you're back to paying mostly interest again. Ask Mortgages by Channing to show you the total interest paid comparison, not just the monthly payment comparison.

Want To Know What This Looks Like On Your Numbers?

Every scenario is different. A soft credit check tells you where you actually stand, and nothing hits your report until you decide to move forward.

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Requirements

Rate-and-Term Refinance Requirements

Requirements are generally more forgiving than a purchase loan, you already own the property, which reduces risk for the lender. Here are the conventional standards.

Requirement	Conventional Standard
Min. Credit Score	620 (better pricing at 680+)
Max LTV	97% (primary, strong credit)
Max DTI	43 to 50% (DU approved)
Income Documentation	Full doc, same as purchase
Appraisal	Required (waiver possible in some cases)
Seasoning	No minimum for most rate-and-term refis
Net Tangible Benefit	Required, must demonstrably benefit borrower
Cash Back at Closing	Limited, typically under $2,000

Streamline Options

FHA, VA & USDA Streamline Refinances

If you have a government-backed loan, you may qualify for a streamline refinance, a simplified version of the rate-and-term refi with reduced documentation and sometimes no appraisal required.

FHA Streamline Refinance

No appraisal requiredUses original purchase price or current balance, not current value.
Reduced income documentationNo income verification in most cases. Just credit and payment history.
Must result in net tangible benefitTypically a 5% reduction in P&I + MIP payment, or switching from ARM to fixed.
Must be current on existing FHA loanNo 30-day lates in the past 12 months.

VA IRRRL (Streamline)

No appraisal required in most cases
No income or employment verificationSimplest refi process available. Certificate of Eligibility typically not re-required.
Must lower rate or move ARM to fixedNet tangible benefit requirement applies.
Reduced VA funding fee (0.5%)Much lower than the purchase funding fee.

Streamline refis are among the fastest, easiest transactions in mortgage

FHA Streamline and VA IRRRL refinances can close in as little as 2 to 3 weeks because there's minimal underwriting. If you have a government loan and today's rates are lower than what you're paying, this is one of the most straightforward financial wins available. See FHA Streamline guide → See VA IRRRL guide →

Comparison

Rate-and-Term vs. Cash-Out Refinance

Both replace your existing mortgage, but with very different goals and tradeoffs.

Rate-and-Term

Goal: better loan termsLower rate, shorter term, program change.
No cash out at closingLoan balance stays approximately the same.
Lower rate than cash-outRate-and-term prices 0.125% to 0.25% better than cash-out on conventional.
Higher max LTV (up to 97%)You don't need 20% equity to qualify.

Cash-Out Refinance

Goal: access equity as cashReceive lump sum at closing for any purpose.
Larger new loan balanceYou're borrowing more than you currently owe.
Slightly higher rateSmall rate premium vs. rate-and-term on same loan.
Max 80% LTV (conventional)Requires more equity than rate-and-term.

If your goal is strictly to improve your rate or terms, rate-and-term wins every time. If you need cash, the cash-out refinance is the right tool despite its slightly higher cost.

Not Sure Which Refinance Is Right?

Mortgages by Channing will run both scenarios, rate-and-term and cash-out, and show you the payment, total cost, and break-even on each option.

See My Refinance Numbers 337-476-2623

Common Questions

Rate-and-Term Refinance FAQ

Closing costs on a rate-and-term refinance typically run 2% to 4% of the loan amount, similar to a purchase but sometimes lower since there's no title search on a new property. Common costs include origination fee, appraisal, title insurance, recording fees, and prepaids. Many borrowers roll closing costs into the new loan balance rather than paying out of pocket, which slightly increases the balance but eliminates upfront cost. Mortgages by Channing provides a full Loan Estimate early in the process.

The old rule of thumb was "at least 1%." The real answer depends on your loan balance, closing costs, and how long you plan to stay. On a $400,000 loan, even a 0.50% rate drop can save enough to break even in under 2 years. Mortgages by Channing will calculate your specific break-even point so you're not guessing. The question is always: does your savings timeline justify the closing cost?

For a standard conventional rate-and-term refi, yes, a new appraisal is typically required to establish current value and confirm LTV. However, appraisal waivers are available through Fannie Mae's Collateral Underwriter (CU) and Freddie Mac's ACE tool when automated systems have sufficient data on your property. FHA Streamline and VA IRRRL refinances don't require a new appraisal at all. Mortgages by Channing will determine early in the process whether an appraisal waiver applies to your loan.

Standard rate-and-term refinances require the loan to be within LTV guidelines, meaning you typically need at least 3 to 5% equity. If your home has declined in value and you're underwater, options are limited but may exist: Fannie Mae's high-LTV refinance programs allow qualifying conventional borrowers to refinance regardless of LTV if the loan is currently owned by Fannie or Freddie. FHA and VA streamline refis also don't use current appraisal value, making them available even in declining equity situations.

For a conventional rate-and-term refinance, there's generally no required seasoning period, you can refinance as soon as you close on the purchase if rates make it worthwhile. For FHA Streamline, you must have made at least 6 payments and be 210 days from your last closing. For VA IRRRL, you need 7 months of payments. Mortgages by Channing will confirm the exact seasoning rules for your specific loan type.

A refinance replaces your entire loan with a new one at a new rate, resetting the term. A recast (also called re-amortization) keeps your existing loan and interest rate but recalculates your payment schedule after a large principal payment, lowering your monthly payment without changing the rate or opening a new loan. Recasts don't require a credit check or full underwriting, but you need to make a lump-sum payment (typically $10,000+ minimum) and not all lenders offer them. If your goal is purely a lower payment and you have extra cash on hand, a recast may cost less than a refi. If your goal is a lower rate, only a refinance accomplishes that.

The Application

Apply From Your Phone In Fifteen Minutes

The whole application runs on your phone. Snap photos of your documents, connect your bank, and you're done. It reaches me the minute you submit it.

Starts with a soft credit check, so your score is never touched
We show you the break-even month before you pay for anything
Upload documents with your phone camera, no scanner needed
You hear back from Channing, not from a call center queue

If the numbers say wait, I'll tell you that too, and then we make a plan to fix whatever is in the way.

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