Rate & Term

What is Rate & Term?

Rate & Term allows you to change the interest rate and/or term for existing mortgages. It works by first paying off the unpaid principal balance of the existing “first mortgage” (including any prepayment penalties).

Who can utilize this type of loan?

Anyone with a current mortgage and also people who have a construction loan looking to improve their current home loan rates and terms. This loan must be used for single-closing construction-to-permanent transactions, paying for construction costs to build a home, which may include paying off an existing lot lien.

Details

The new loan can be used to finance the payment of closing costs, points, and prepaid items. With the exception of real estate taxes that are more than 60 days delinquent, the borrower can include real estate taxes in the new loan amount since:

• the real estate taxes must be paid in full through the transaction, and
• payment for the taxes must be disbursed to the taxing authority through the closing transaction, with no funds used for the taxes disbursed to the borrower.

You can also:

• Buying out a co-owner pursuant to an agreement;
• Paying off a subordinate mortgage lien (including prepayment penalties) used to purchase the subject property. The lender must document that the entire amount of the subordinate financing was used to acquire the property; or
• Paying off the unpaid principal balance of PACE loans and other debt used for energy-related improvements. See B5-3.3-01, HomeStyle Energy for Improvements on Existing Properties for more information