Refinancing your mortgage can be a game-changer when it comes to lowering your interest rate, reducing monthly payments, or tapping into your home equity. However, with multiple refinancing options available, choosing the right one for your financial situation is crucial.
This guide breaks down the top mortgage refinance options, their benefits, and how to determine which refinance type best suits your goals.
What Is Mortgage Refinancing?
Mortgage refinancing is the process of replacing your existing mortgage with a new loan—typically to secure better terms, lower interest rates, or cash out home equity.
📌 Common Reasons Homeowners Refinance:
✔ Lower interest rates and save money over time.
✔ Reduce monthly payments to improve cash flow.
✔ Convert home equity into cash for renovations, debt consolidation, or other expenses.
✔ Switch from an adjustable-rate mortgage (ARM) to a fixed-rate loan for stability.
✔ Eliminate private mortgage insurance (PMI).
💡 Refinancing can be a powerful financial move—but choosing the right type is key.
Top 9 Mortgage Refinance Options
1. Rate-and-Term Refinance
A rate-and-term refinance allows you to change the interest rate and loan term without increasing the loan amount.
📌 Best for:
✔ Lowering monthly mortgage payments
✔ Shortening loan term to pay off faster
✔ Locking in a better interest rate
💡 Ideal when interest rates drop or you want a new loan term without borrowing additional funds.
2. Cash-Out Refinance
A cash-out refinance lets you tap into your home equity by borrowing more than what you owe on your mortgage. The difference is paid out in cash.
📌 Best for:
✔ Home renovations or improvements
✔ Paying off high-interest debt (credit cards, student loans)
✔ Investing in other opportunities
💡 Keep in mind: A larger loan means higher monthly payments and possible higher interest costs over time.
3. Cash-In Refinance
With a cash-in refinance, you pay down a significant portion of your mortgage balance to secure better terms, a lower interest rate, or eliminate PMI.
📌 Best for:
✔ Reducing your loan-to-value (LTV) ratio
✔ Lowering monthly payments
✔ Increasing home equity faster
💡 Ideal for homeowners with extra cash looking to reduce their loan balance.
4. FHA Streamline Refinance
An FHA Streamline Refinance allows homeowners with an FHA loan to refinance with less paperwork, no home appraisal, and lower closing costs.
📌 Best for:
✔ FHA borrowers looking for lower rates
✔ Homeowners who want a hassle-free refinance
✔ Avoiding a new appraisal process
💡 No income verification required, but must be current on mortgage payments.
5. VA Streamline Refinance (IRRRL)
A VA Interest Rate Reduction Refinance Loan (IRRRL) is designed for veterans, active-duty service members, and surviving spouses with a VA loan.
📌 Best for:
✔ VA borrowers looking for lower rates or monthly payments
✔ Switching from an ARM to a fixed-rate loan
✔ A faster, easier refinancing process
💡 No home appraisal or income verification required, making it one of the easiest refinance options.
6. USDA Streamline Refinance
A USDA Streamline Refinance is available to homeowners with an existing USDA loan who want lower monthly payments and interest rates.
📌 Best for:
✔ USDA borrowers looking for easier refinancing
✔ Homeowners in rural or suburban areas
✔ Avoiding an appraisal or credit check
💡 This option offers lower fees and easier approval for qualifying USDA borrowers.
7. Reverse Mortgage Refinance
A reverse mortgage refinance allows homeowners 62+ to convert their home equity into cash without making monthly mortgage payments.
📌 Best for:
✔ Retirees needing extra income
✔ Homeowners who want to stay in their home
✔ Eliminating monthly mortgage payments
💡 Heirs must repay the loan when the homeowner moves, sells, or passes away.
8. No-Closing-Cost Refinance
A no-closing-cost refinance rolls closing fees into the loan balance or results in a higher interest rate instead of upfront costs.
📌 Best for:
✔ Homeowners who don’t have cash for closing costs
✔ Short-term homeowners who plan to move soon
💡 While there’s no upfront payment, the total loan cost may be higher over time.
9. Short Refinance (For Homeowners in Financial Trouble)
A short refinance helps borrowers who are behind on payments or at risk of foreclosure by replacing their loan with a new, more affordable one.
📌 Best for:
✔ Homeowners struggling financially
✔ Avoiding foreclosure
✔ Negotiating better repayment terms
💡 This is lender-approved and may negatively impact your credit score.
How Much Does It Cost to Refinance?
📌 Typical Refinance Closing Costs: 3% – 6% of the loan amount
✔ Origination fees – Lender charges for processing the loan
✔ Appraisal fees – Determines home value (may be waived for streamline refis)
✔ Title insurance – Protects against ownership disputes
✔ Taxes & insurance – Property taxes and homeowners insurance payments
💡 Calculate whether refinancing saves you money before moving forward.
How to Choose the Best Refinance Option
Ask yourself these key questions:
1️⃣ What’s my goal? Lower payments? Shorten loan term? Get cash out?
2️⃣ How much equity do I have? Equity affects cash-out and qualification options.
3️⃣ Can I afford closing costs? No-closing-cost refis may be an option.
4️⃣ Do I qualify for a streamline refinance? FHA, VA, and USDA loans offer simplified refinancing.
5️⃣ How long will I stay in my home? Short-term homeowners should avoid high upfront costs.
💡 Still unsure? Talk to a lender for personalized refinance recommendations.
The Bottom Line: Should You Refinance?
Refinancing can be a smart financial move, but the right option depends on your goals and situation.
✔ Choose Rate-and-Term Refi for lower payments or a shorter loan.
✔ Choose Cash-Out Refi for accessing home equity.
✔ Choose Streamline Refi (FHA, VA, or USDA) for an easy process.
✔ Choose Reverse Mortgage for retirement income.
✔ Choose No-Closing-Cost Refi if you don’t want upfront fees.
📌 Ready to explore your refinance options? Get personalized refinance recommendations today!
💻Get Preapproved For A Home Loan Today!
