A Rate and Term Refinance mortgage is when a home borrower isn’t interested in taking any cash out. They are looking to lower their mortgage rate or to shorten the loan term. Sometimes you can do both because of mortgage rates dropping in today’s market. A mortgage term can be lowered from a 30yr fixed to a 25, 20, 15, or 10yr fixed term. When the mortgage rate is unchanged it is called a mortgage term refinance. This type of refinance loan is uncommon as most borrowers would like a lower interest rate. Rate Term refinances help many homeowners avoid adjusting ARMs, and help them take advantage of the current mortgage rates. Many home borrowers may have rebuilt their credit score, and would like to refinance out of a subprime mortgage loan. Rate Term refinancing can also help to get out of paying PMI. With home appreciation the borrower will have a new loan-to-value ratio, and may qualify to refinance out of the PMI payments. A borrower may also take out up to $2,000 or 2% (whichever is less) of the new mortgage amount. These numbers can’t be exceeded or the transaction will turn into a cash out refinance. Conventional Refinance allows up to 95% for rate term refinancing; FHA refinance allows up to 97.75% loan to value; VA Refinance allows up to 90% for rate term if you’re going from a Conventional to VA.