Lower monthly payment when the rate drops
A meaningful drop in rate at the same balance and term reduces your monthly principal-and-interest payment for the remaining life of the loan.
Texas rate-and-term refinance.
Lower your rate, change your loan term, or both — without taking cash out. The simplest refinance: keeps your loan balance the same, changes only the structure.
- No cash withdrawn
- Lower rate or shorter term
- No 3-day rescission for owner-occupied
A new mortgage with the same balance, different terms.
A rate-and-term refinance replaces your existing mortgage with a new one — same balance, different rate or different term (or both). Common reasons: rates have dropped since you bought, you want to shorten a 30-year into a 15-year, you have hit 80% LTV and want to drop PMI, or you want to switch from an ARM to a fixed-rate before the next adjustment. Because no cash is withdrawn against equity, a rate-and-term is NOT a Texas Section 50(a)(6) loan — none of the constitutional cash-out rules (80% combined LTV cap, 12-day cooling-off, 2% closing-cost cap) apply. That makes the file faster to close and frees you from many of the structural restrictions that bind cash-out refis in Texas.
How a Texas rate-and-term refinance closes.
- 01
Determine your current loan and target new terms
We pull your current rate, term, balance, and PMI status; then model the new payment at today's available rates and terms. The break-even calculation (closing costs divided by monthly savings) tells you the month the refinance starts paying you back.
- 02
Apply with full documentation and order an appraisal
Rate-and-term files are full-doc: income (W-2, pay stubs, tax returns), assets, debts, and your current first-mortgage statement. The appraisal establishes current value — important for confirming LTV and whether PMI can be removed.
- 03
Underwriting
Lender clears credit, income, value, and title conditions. Because no cash is changing hands against equity, the file moves on standard mortgage underwriting timelines — no Section 50(a)(6) cooling-off period.
- 04
Closing disclosure (3-business-day TRID wait)
Closing disclosure is issued at least 3 business days before closing per TRID. This is a federal disclosure window, not a rescission period — the loan can fund on the closing date itself.
- 05
Closing and funding
You sign at title. For an owner-occupied primary residence rate-and-term refinance, there is no 3-day right of rescission — funds disburse and the new loan is in force the same day.
Built for Texas homeowners refinancing for rate or term.
Rate-and-term is the most-misunderstood refinance category in Texas. Because cash-out refis here carry constitutional protections (the famous Section 50(a)(6) rules), borrowers often assume those same rules apply to a simple rate reduction — they don't. Your rate-and-term refinance is governed by ordinary federal mortgage rules, not the Texas constitution. That means it closes faster, has fewer structural caps, and funds the day of closing on a primary residence. We model the break-even on every file and tell you straight whether the math actually works — even if the answer is "not yet."
A rate-and-term refinance is the right tool when:
- Your current rate is roughly 0.5–1% above today's market and you plan to stay long enough to clear closing costs
- You want to shorten your term (typically 30-year into 15-year) to cut lifetime interest
- You have reached 80%+ equity and want to drop PMI permanently by refinancing out of FHA into Conventional
- You want to switch from an ARM to a fixed-rate before the next rate adjustment
- You want to consolidate a first mortgage and a second mortgage into a single new first mortgage
Why a Texas rate-and-term refinance can pay off.
Pay off your home faster
Refinancing a 30-year into a 15-year typically dramatically cuts total interest paid — at the cost of a higher monthly payment. Best play once income has grown since the original loan.
Drop PMI permanently
If you started with FHA or with less than 20% down on a Conventional, a refinance to Conventional once you have 20%+ equity removes mortgage insurance for good — sometimes worth it even at a flat rate.
ARM-to-fixed conversion
Lock in payment certainty before your adjustable-rate mortgage hits its next adjustment window. Especially valuable if rates are trending up or your initial fixed period is ending.
No cash-out complexity
No Section 50(a)(6) constitutional rules, no 80% combined LTV cap, no 2% closing-cost cap, no 12-day cooling-off period. Standard federal mortgage timeline only.
Same-day funding on a primary residence
Owner-occupied primary residence rate-and-term refis do not have the 3-day right of rescission that applies to cash-out / second mortgages on a primary home. The new loan can fund on the closing date.
0.5–1%
Typical break-even rate drop
Rate-and-term refinance questions, answered.
When does a rate-and-term refinance make sense?
The classic trigger is roughly 0.5–1% below your current rate, but the real test is the break-even calculation: total closing costs divided by monthly payment savings tells you how many months it takes for the refinance to pay you back. If you plan to stay in the home well past the break-even month, the math usually works. Other strong scenarios: shortening your term, dropping PMI, or converting an ARM to a fixed-rate before adjustment.
How is rate-and-term different from a cash-out refinance?
A rate-and-term refinance keeps your loan balance the same — only the rate and/or term change. A cash-out refinance pays off your existing mortgage with a new, larger one and gives you the difference in cash. In Texas the distinction is critical: cash-out refis on a primary residence are governed by Article XVI Section 50(a)(6) of the Texas Constitution (80% combined LTV cap, 12-day cooling-off, 2% closing-cost cap, only one home equity loan at a time, spousal consent). Rate-and-term refis carry none of those constitutional restrictions.
How long does a rate-and-term refinance take to close?
A clean rate-and-term file typically closes in roughly 30–45 days from application, gated mostly by appraisal turn time and underwriting throughput. There is no Texas Section 50(a)(6) cooling-off period for a rate-and-term, so the only mandatory federal wait is the 3-business-day TRID closing disclosure window before closing.
Are there closing costs on a refinance?
Yes — origination, appraisal, title, recording, and lender fees apply to any refinance. Total closing costs typically run roughly 3–5% of the loan amount. The break-even calculation (closing costs divided by monthly savings) tells you whether the refinance actually saves you money over the time you plan to stay in the home.
Can I roll closing costs into the loan?
Often yes. You can either roll closing costs into the new loan balance (raising the balance slightly but reducing cash to close to near zero) or take a slightly higher rate in exchange for a lender credit that covers some or all of the closing costs. Both options are real — we model the trade-offs against your break-even before recommending one.
Will I need a new appraisal?
Almost always yes — a new appraisal establishes the current value, which determines your loan-to-value ratio and confirms whether PMI can be removed (Conventional) or whether the new loan structure works at all. Some streamline refinance programs (FHA Streamline, VA IRRRL) waive the appraisal in narrow circumstances, but standard rate-and-term files include one.
Time to refinance? Let's run the numbers.
Rate-and-term refinance requirements at a glance.
- Existing primary residence in Texas (second home and investment available separately)
- 6+ months on your current loan typical (some loan types require longer seasoning)
- FICO 620+ (program-dependent — Conventional, FHA, VA, USDA all available)
- DTI 50% or lower in most programs
- Stable income documentation (W-2, pay stubs, tax returns)
- Sufficient equity for the new loan structure (often 5–20% depending on program and PMI rules)
- Property must appraise at value
- Closing-cost capacity (typically 3–5% of loan amount, can sometimes be rolled in or offset by lender credit)
Rate-and-Term vs Cash-Out vs HELOC vs Streamline Refi.
| Cash withdrawn? | Texas 50(a)(6)? | Best for | |
|---|---|---|---|
| Rate-and-Term | No | No — federal rules only | Lowering your rate, shortening your term, dropping PMI, ARM-to-fixed conversion |
| Cash-Out Refinance | Yes — single lump sum | Yes — 80% combined LTV, 12-day cooling-off, 2% cost cap | Tapping equity in one transaction with a single new first mortgage |
| HELOC | Yes — revolving line | Yes — same Section 50(a)(6) protections apply | Flexible, ongoing access to equity over a 10-year draw period |
| Streamline Refi (FHA / VA) | No | No — federal program rules | Reducing rate on existing FHA or VA loan with minimal documentation and often no appraisal |
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Other ways we close
Cash-Out Refinance
Tap equity by refinancing into a larger loan — Texas Section 50(a)(6) governed.
Learn moreHELOC
Revolving line of credit secured by your home — flexible draws over a 10-year period.
Learn moreRefinance Process Guide
Step-by-step walkthrough of how a Texas refinance closes, application to funding.
Learn more