What is a rate term refinance?

A rate term refinance replaces your current mortgage with a new loan that has a different interest rate, loan term, or both. Unlike a cash-out refinance, no additional cash is taken out beyond covering closing costs and prepaids.

What is the maximum LTV for a conventional rate term refinance?

For a standard conventional rate/term refinance, the maximum LTV is 95%. For HomeReady, the maximum LTV is 97% for owner-occupied single-family homes. Both require PMI when LTV exceeds 80%.

What is HomeReady and how do I qualify?

HomeReady is Fannie Mae's program offering reduced PMI rates and lower interest rates for borrowers with income ≤ 80% of Area Median Income (AMI). It allows refinancing up to 97% LTV.

What DTI do I need for a conventional rate term refinance?

Most lenders prefer a DTI of 43% or lower for conventional refinances. Some may allow up to 50% with strong compensating factors.

How is PMI calculated for a rate term refinance?

PMI is calculated based on your credit score, loan type, and LTV ratio. Higher credit scores and lower LTV result in lower PMI rates.

Rate Term Refinance Calculator

Estimate your new payment • Check LTV & DTI • See HomeReady eligibility

Unlock your home's equity with our Rate Term Refinance Calculator! This calculator helps you determine if you qualify for a simple rate term refinance. I have included the HomeReady refinance requirements on the possibility that you can obtain special financing. This calculator reflects a rate term refinance for a single family owner occupied loan. See below for more information.

Area Median Income Lookup

Fannie Mae AMI Lookup Freddie Mac AMI Lookup

Check if your loan is owned by Fannie Mae or Freddie Mac:

Fannie Mae Loan Lookup Freddie Mac Loan Lookup

Required for HomeReady eligibility. Your loan must be owned by Fannie Mae or Freddie Mac.

AREA MEDIAN INCOME (AMI) $

Enter 100% of AMI from lookup tools above. The calculator will automatically reduce to 80% for HomeReady eligibility.

HomeReady requires income ≤ 80% of AMI. Enter the 100% AMI value and we'll do the math.

Credit & Loan Type

CREDIT SCORE

LOAN TYPE

Fixed, Non-Fixed (ARM), USDA, or VA loan types

A. PROPERTY & CURRENT LOAN INFORMATION

CURRENT HOME VALUE ($)

B. INCOME INFORMATION

MONTHLY GROSS INCOME ($)

For HomeReady eligibility, annual income must be ≤ 80% of AMI

C. NEW LOAN INFORMATION

NEW LOAN TERM (YEARS)

NEW INTEREST RATE (%)

LOAN PROGRAM SELECTION

Select HomeReady for low-to-moderate income (97% LTV) - income must be ≤ 80% of AMI

MAX LTV ALLOWED

D. CLOSING AND PREPAID COSTS

CLOSING COSTS

PREPAID ITEMS (ESTIMATED)

Auto-calculated from taxes & insurance

ANNUAL PROPERTY TAXES ($)

ANNUAL HOMEOWNERS INSURANCE

Debt Type	Balance	Monthly Payment	Remove
✓ Will be paid off
Stays as recurring debt

Conventional Rate Term Refinance Analysis

Understanding Rate Term Refinance Options

When refinancing your mortgage, you have two primary options for a conventional rate term refinance:

Standard Rate Term Refinance

Requires a minimum of 5% equity in your home (95% LTV maximum)
Standard PMI rates apply based on LTV and credit score
No income restrictions
Available to all borrowers regardless of income

HomeReady Rate Term Refinance

Allows refinancing up to 97% of your home's appraised value
Reduced PMI rates compared to standard conventional loans
Often lower interest rates than standard conventional loans
Requires income ≤ 80% of Area Median Income (AMI)
Your current mortgage must be owned by Fannie Mae or Freddie Mac

                            HomeReady Advantage: If you qualify, HomeReady typically offers better pricing (lower interest rates and lower PMI) than a standard conventional refinance, making it an excellent option for borrowers with limited equity.
                        

HomeReady Program Requirements

To qualify for a HomeReady refinance, two key requirements must be met:

Income Limit — Your annual household income must not exceed 80% of the area median income (AMI) for your county or metro area.
Existing Loan Requirement — Your current mortgage must be owned or securitized by Fannie Mae or Freddie Mac.

Check Your Loan Ownership: Use these official lookup tools to see if your loan is owned by Fannie Mae or Freddie Mac:

Fannie Mae Loan Lookup Tool
Freddie Mac Loan Lookup Tool

Required for HomeReady eligibility. If your loan is not owned by Fannie Mae or Freddie Mac, you may still qualify for a Standard Refinance.

Understanding Property Taxes and Homeowners Insurance

To estimate your property tax and insurance costs:

Multiply your monthly real estate tax by 12 to get your annual cost, or
Call your mortgage servicer and ask the customer service representative for the annual cost of your taxes and insurance.

Tip: Your annual taxes and insurance are used to calculate your monthly escrow payment. Enter the annual amounts in the calculator above for the most accurate results.

Estimating Closing Costs

Closing costs for a refinance vary by state and lender. A good rule of thumb:

Home Value	3% Estimate	4% Estimate	5% Estimate
$200,000	$6,000	$8,000	$10,000
$250,000	$7,500	$10,000	$12,500
$300,000	$9,000	$12,000	$15,000
$350,000	$10,500	$14,000	$17,500
$400,000	$12,000	$16,000	$20,000

Tip: Use 3% as a conservative estimate for closing costs. Actual costs vary by state and lender — always get a Loan Estimate from your lender for accurate numbers.

Key Factors That Impact Your Refinance

Credit Score — Higher scores qualify for better rates and lower PMI
Loan-to-Value (LTV) — Lower LTV means less risk and better terms
Debt-to-Income (DTI) — Must be ≤ 43% for most conventional loans
Income — Determines HomeReady eligibility (≤ 80% AMI)

Related Calculators

Explore our other free mortgage calculators to help with your home buying or refinancing decisions:

Cash-Out Refinance Calculator — Estimate how much cash you can take out of your home equity
All Mortgage Calculators — Browse our complete collection of mortgage calculators