Which refinance transaction involves lowering the interest rate or reducing the term of the loan?

The correct choice refers to a transaction aimed specifically at altering the existing loan terms to achieve a lower interest rate or to reduce the remaining term of the loan. This type of refinance is designed to improve the borrower's financial situation by decreasing monthly payments or allowing them to pay off the loan faster.

In a Rate and Term Refinance, the focus is primarily on obtaining a new loan that replaces the existing one while adjusting the rate and/or the duration. This can effectively lower monthly payments and reduce the overall interest paid over the life of the loan, making it a popular method for homeowners looking to save money.

Other types of refinancing, such as Cash-Out Refinance, primarily focus on converting home equity into cash rather than just altering the borrowing terms. Streamlined and Conventional Refinance options may have specific criteria or features, but the core purpose of the Rate and Term Refinance is directly aligned with the goals of reducing interest or loan term.