An FHA rate and term refinance lets you replace your existing FHA loan with a new FHA loan at a different rate, a different term, or both, without pulling cash out. It's designed for borrowers who got an FHA loan at a higher rate and want to lower their monthly payment or change their loan duration without tapping equity. But there's a requirement most borrowers don't know about, and it determines whether the refi actually pencils out.
What Rate and Term Means
Rate and term refers to what's changing in the refinance. You can lower the rate, shorten the term (from 30 to 15 years, for example), or both. What you're not doing in a rate and term refi is pulling equity out of the property: that's a cash-out refinance, which has different requirements and typically higher rates.
For FHA rate and term refinances, you can roll your existing balance plus closing costs into the new loan. You can't increase the loan amount beyond what's allowed for financing those closing costs.
FHA Streamline Refinance vs. Standard Rate and Term
FHA has a simplified version called the FHA Streamline Refinance. It doesn't require an appraisal (in most cases), has reduced documentation requirements, and processes faster. The trade-off is that your new loan balance can't exceed the original loan balance.
A standard FHA rate and term refinance requires full underwriting including an appraisal, income verification, and credit review. You can include closing costs in the new loan amount as long as the combined total doesn't exceed the lower of the appraised value or the FHA loan limit for your county. If rates have dropped enough that you want to refinance but your closing costs are significant, the standard rate and term is more flexible about loan sizing. If you want to keep the process simple and move fast, the streamline is often better.
The Net Tangible Benefit Requirement
FHA requires that a refinance provide a "net tangible benefit," meaning it must meaningfully improve your situation. The definition: the new rate and MIP payment must be at least 5 percent lower than your current rate and MIP payment combined.
Does Your FHA Refi Clear the 5% Threshold?
The break-even calculation takes about 10 minutes. We'll run the numbers on your current rate and MIP and tell you if a rate and term refinance actually saves you money.
This requirement prevents refinancing that only benefits the lender through new origination fees without actually helping you. Your lender should calculate this before processing your application. If the math doesn't clear 5 percent, you shouldn't be doing the refi.
MIP on the Refinanced Loan
Refinancing into a new FHA loan means new FHA mortgage insurance premiums. The upfront MIP (1.75% of the loan amount) gets added to the loan. The annual MIP continues as a monthly payment.
If you originally borrowed with less than 10 percent down, your FHA MIP is for the life of the loan. Refinancing into a new FHA loan restarts that clock. If you've built 20 percent equity and can now qualify for conventional financing, a conventional refinance eliminates MIP entirely, which may be more valuable than a modest rate reduction on a new FHA loan.
Florida-Specific Considerations
Florida FHA loan limits vary by county. In high-cost markets like Miami-Dade, Palm Beach, and Monroe counties, the 2026 FHA loan limits are higher than in more rural markets. If your current balance is near the limit, verify that your county's FHA limit accommodates your refinanced balance plus closing costs before starting the process.
At 14 Days To Close, we handle both FHA Streamline and standard rate and term refinances across Florida. We've built our process around a 14-day closing timeline, and when the file is clean and the documentation is in, we hit that target. Give us a call or start your application to see what your options look like.
