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FHA Rate and Term Refinance — Lower Your Rate Without Taking Cash Out

If you want to reduce your interest rate, shorten your loan term, or change from an adjustable to a fixed rate — without pulling equity out — the FHA Rate and Term Refinance is designed exactly for that purpose.

What It Is

A Rate and Term Refinance replaces your existing mortgage with a new FHA loan at different terms. You’re not taking cash out — you’re improving the rate, the term, or both. Any cash back is limited to a maximum of $500.

Maximum LTV: 97.75%

The FHA Rate and Term Refinance allows a maximum LTV of 97.75% — significantly higher than the 80% allowed for cash-out. Even if you only put 3.5% down when you bought, you may qualify relatively quickly. The maximum CLTV is also 97.75%.

Eligibility Requirements

• Occupancy: Must be your primary residence (standard)
• Payment history: No 30-day late payments in the 6 months prior to case number assignment; no more than one 30-day late in the 7–12 months prior
• Minimum loan amount: $75,000
• Owned less than 12 months: If you’ve owned the property less than 12 months at time of case number assignment, the appraised value for LTV purposes is the lesser of the current appraised value or the original purchase price plus documented improvements

When Rate/Term Makes Sense

• Interest rates have dropped since you bought
• You’re in an adjustable-rate FHA mortgage and want to lock into a fixed rate
• You want to shorten your loan term and pay less interest over the life of the loan
• You want to roll in an existing subordinate lien

Rate/Term vs. FHA Streamline

Practical Takeaways

• Maximum LTV is 97.75% — one of the highest refinance LTVs available
• Up to $500 cash back permitted at closing
• Payment history must be clean for the 12 months prior
• Does not require 20% equity — works even at high LTV
• A net tangible benefit to the borrower is required