What is a rate and term only refinance?

A loan option that may lower your monthly payment or let you pay off your home sooner.

If you want to make your mortgage payments more comfortable and your home value is steady or has increased, you may be able to refinance your mortgage with a rate and term refinance loan. A rate and term only refinance can be either:

  • Conventional, which is backed by Fannie Mae or Freddie Mac
  • A government program, like a VA Interest Rate Reduction Refinance Loan (IRRRL) or a Federal Housing Administration (FHA) Streamline Refinance

Benefits of a rate and term refinance

Lower your interest rate.

Refinancing into a lower interest rate could reduce your payment, leaving more money in your monthly budget. And depending on the term of the loan, you could also save on the total amount of interest paid over the life of the loan.

Change the term of your loan.

Depending on the remaining term of your current loan, you could shorten your loan term with the goal of building equity faster or paying off your home more quickly. If you choose to extend your loan term, you may be able to take advantage of a lower monthly payment. U.S. Bank offers a range of loan terms for rate and term only refinancing.

Keep your existing loan balance.

With a rate and term refinance, the principal remaining from your previous mortgage stays the same as long as you pay your closing costs upfront. This is good news for you, because it means you can continue to build the equity in your home. It differs from a cash out refinance in that it doesn’t pull funds from the equity in your home.

Requirements and qualifications

  • Credit score – A score of 740 or above is generally considered very good, but is not required to refinance your home. The minimum credit score needed for some mortgages is typically around 620. Government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).
  • Home equity – As a general rule, you should have at least 20% equity in your home before you refinance. If you have less than 20%, you may still be able to refinance, but you may be required to pay private mortgage insurance (PMI). A rate and term refinance could also help you eliminate PMI. If your home value has increased or you have 20% or more equity in your home, this could be an option for you.
  • Closing costs – When you refinance your mortgage, you’ll be required to pay closing costs similar to when you purchased your home. While these expenses can vary, you should expect to pay between 2% and 5% of the loan amount. So, on a $250,000 home purchase, you could pay between $5,000 and $12,500 in closing costs. You may be able to roll these costs into your mortgage, but it will increase the principal you must repay.

Are you thinking about using home equity as a way to fund a major purchase?

Using the equity in your home is a great way to pay for things like home improvements, tuition, big events and more.

Cash-out refinance

Access to cash as you refinance

  • Replaces existing mortgage
  • New mortgage terms
  • Closing costs similar to first mortgage
Learn more

Home equity loan

Better if you have a one-time expense

  • Fixed interest rates
  • Predictable repayment schedule
  • Terms up to 30 years1
Learn more

Home equity line of credit

Better for ongoing access to funds as needed2

  • Rates typically lower than credit cards
  • Flexible repayment options
  • Option to lock in a fixed rate
Learn more

Why choose U.S. Bank for your next mortgage?

If you’re an existing client with a U.S. Bank first mortgage, a U.S. Bank Smartly® Checking account or an existing Gold or Platinum Checking Package, you may be eligible for a client credit.3 Take 0.25% of your new first mortgage loan amount and deduct it from the closing costs, up to a maximum of $1,000.4

If your mortgage is with another lender, U.S. Bank offers other refinancing options to lower your interest rate and change the term of your loan.

Ready to get started? Our mortgage loan officers can answer all of your home refinance questions and help you find the mortgage that's right for you.

Explore articles and resources on home improvement tips and refinancing.

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Cash-out refinance vs. home equity loans and lines of credit

Learn more about your options

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Disclosures

  1. Home Equity Loan: As of March 15, 2024, the fixed Annual Percentage Rate (APR) of 7.65% is available for 10-year second position home equity installment loans $50,000 to $99,999 with loan-to-value (LTV) of 60% or less. Rates may vary based on LTV, credit scores or other loan amount. In order to receive the lowest rate advertised, a set-up of automatic payments from a U.S. Bank personal checking or savings account is required but neither are required for loan approval. Customers in certain states are eligible to receive the preferred rate without having automatic payments from a U.S. Bank personal checking or savings account. Loan payment example: on a $50,000 loan for 120 months at 7.65% interest rate, monthly payments would be $597.43. Payment example does not include amounts for taxes and insurance premiums. The monthly payment obligation will be greater if taxes and insurance are included and an initial customer deposit may be required if an escrow account for these items is established. Home equity loans not available for properties held in a trust in the states of Hawaii, Louisiana, New York, Oklahoma and Rhode Island. Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice. Property insurance is required. Other restrictions may apply.

  2. Home Equity Line of Credit: The Annual Percentage Rate (APR) is variable and is based upon an index plus a margin. The APR will vary with Prime Rate (the index) as published in the Wall Street Journal. As of November 6, 2023, the variable rate for Home Equity Lines of Credit ranged from 8.95% APR to 13.10% APR. Rates may vary due to a change in the Prime Rate, a credit limit below $50,000, a loan-to-value (LTV) above 60% and/or a credit score less than 730. A U.S. Bank personal checking account is required to receive the lowest rate, but is not required for loan approval. Customers in certain states are eligible to receive the preferred rate without having a U.S. Bank personal checking account. The rate will never exceed 18% APR, or applicable state law, or below 3.25% APR. Choosing an interest-only repayment may cause your monthly payment to increase, possibly substantially, once your credit line transitions into the repayment period. Repayment options may vary based on credit qualifications. Interest-only repayment may be unavailable. Loans are subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice. Credit line may be reduced or additional extensions of credit limited if certain circumstances occur.

    An early closure fee of 1% of the original line amount, maximum $500, will apply if the line is paid off and closed within the first 30 months. Property insurance is required. Other restrictions may apply. An annual fee of up to $75 may apply after the first year and is waived or discounted with an existing U.S. Bank Platinum Checking Package or with enrollment in our Smart Rewards Program. Annual fees are assessed based on the tier in our Smart Rewards Program on your HELOC anniversary date. Please refer to your Smart Rewards terms and conditions for more information on tier assignment.

  3. Clients may be eligible for this credit with an existing U.S. Bank first mortgage, a U.S. Bank Smartly Checking account or an existing Gold or Platinum Checking Package. A minimum of $25 is required to open a U.S. Bank Smartly Checking account. For a comprehensive list of account pricing, terms and policies see the Consumer Pricing Information disclosure and the Your Deposit Account Agreement. These documents can be obtained by contacting a U.S. Bank branch or calling 800-872-2657.

  4. To calculate the U.S. Bank Client Credit, take 0.25% of your new first mortgage loan amount and deduct it from the closing costs. For purchase or refinance transactions, the maximum credit is $1,000. Certain mortgages may not be eligible for stated credits. Offer may not be combined with any other mortgage offers and can only be applied once per property within a 12-month period.

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Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, Home Equity and Credit products are offered through U.S. Bank National Association. Deposit products are offered through U.S. Bank National Association. Member FDIC.