Understanding Refinance Rate & Term
A rate-and-term refinance replaces an existing real estate loan with a new loan without primarily focusing on taking significant cash out of the property.
The objective may be to obtain more appropriate financing terms, replace maturing debt, reduce a monthly payment, change the loan structure, or move from temporary financing into a longer-term program.
A rate-and-term refinance may be considered when a borrower wants to
- Refinance a maturing balloon payment
- Replace a short-term bridge loan
- Move from renovation financing into permanent debt
- Adjust the interest rate or payment structure
- Extend the remaining repayment period
- Consolidate eligible property-related debt
- Transition into a DSCR or rental program
- Remove an existing lender or loan structure
Important Program Considerations
The new loan amount typically covers the existing mortgage payoff, approved closing costs, and other eligible transaction expenses. Limited additional proceeds may be available under certain programs, although a transaction involving substantial equity withdrawal would generally be considered a cash-out refinance.
What Funding Sources May Review
Lenders may evaluate the property’s current value, outstanding balance, payment history, occupancy, rental income, property condition, borrower credit profile, liquidity, and requested loan-to-value ratio.
Important Program Considerations
The property’s current status can influence the available program. Stabilized properties may qualify for long-term financing, while properties undergoing renovation, lease-up, or repositioning may require an interim bridge loan.
Information to Prepare
To request a review, provide the property value, current mortgage balance, existing interest rate, maturity date, monthly payment, property income, requested new loan amount, occupancy, property condition, and the primary reason for refinancing.