Understanding your options for refinancing

There are two primary options for refinancing your mortgage, each with its own costs and benefits.


If you are considering refinancing your mortgage, there are two primary options you’ll need to choose between: no cash-out refinance and cash-out refinance. Each is designed to meet specific goals. But be sure to talk with your lender about the costs and benefits of each option as refinancing will require both time and money.

No cash-out refinance

With a no cash-out refinance, you are primarily refinancing the remaining unpaid balance on your mortgage. This is the most common option and may make sense if you’re looking to:

  • Lower your mortgage rate. If mortgage rates are lower than when you closed on your current mortgage, refinancing could reduce your monthly payments and the total amount of interest that you pay over the life of the loan.
  • Move from one mortgage product to another. If your current mortgage is an adjustable-rate mortgage (ARM) and it no longer makes sense for your financial situation, refinancing into the security and stability of a fixed-rate mortgage may be a good decision.
  • Build equity faster. If your financial situation has improved since your purchase, refinancing to a loan with a shorter term (e.g., from a 30-year fixed-rate mortgage to a 15-year fixed-rate mortgage) will allow you to build equity faster, own your home sooner and pay less in total interest.

Cash-out refinance

If you’ve built up significant equity in your home over the years and could use funds for home improvements or to improve your financial situation, a cash-out refinance may make sense for you.

With a cash-out refinance, you’re refinancing your mortgage for more than you currently owe. In return, you’re getting a portion of your equity back in cash. Cash-out refinances generally have a slightly higher mortgage rate because you are borrowing more money, which is an added risk to the lender making the loan.

Speak to your lender to discuss your refinance options. Consider meeting and comparing multiple lenders to determine which lender offers the best terms and cost.

Remember, your new loan will have a new rate and term, and you’ll be responsible for all costs associated with the refinance.

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