7 types of mortgage refinance options

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Refinancing your mortgage can help you achieve a variety of goals, such as lowering your monthly payment, paying off your loan early, taking out cash, or getting rid of mortgage insurance. Here are seven home refinance options to choose from — and how to qualify for each one.

• Learn about 6 times when it's a good idea to refinance your mortgage.

The 7 types of home loan refinances

Here is a basic run-down of the types of mortgage refinances you can choose from. Do a couple look like they would benefit you? We dive deeper into each option below.

1. Rate-and-term refinance

A rate-and-term refinance changes your interest rate, term length, loan type, or some combination of these three. It’s what you might think of as a “traditional” refinance.

This is usually a good option if refinance rates are lower than your existing mortgage rate, or if you want to choose a shorter or longer loan term. For instance, if you needed a lower payment, you might refinance your current loan into a new 30-year one. This would spread your payments out over more months and reduce your monthly payments. (Refinancing into a shorter-term loan, like a 15-year one, would do the opposite — raising your payment but helping you pay off your loan sooner and with fewer interest costs.)

You also might consider a rate-and-term refinance to change loan types. If you have an adjustable-rate mortgage, for example, you may use this type of refinance to replace that with a fixed-rate mortgage, which has a set interest rate and payment for life. You could also refinance from an FHA loan — which comes with FHA mortgage insurance premiums (MIPs) — into another loan that doesn’t have that added expense.

• MORE: See our picks for the best mortgage refinance lenders.

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2. Cash-out refinance

You’d use a cash-out refinance if you want to tap your home equity. With this option, you’ll take out a loan that’s larger than your current mortgage balance, use it to pay off your old loan, and get the difference in cash. You can then use the money however you’d like. Many homeowners use it for home improvements or consolidating higher-interest debts.

You can get a cash-out refinance with most loan types, including FHA, VA, and conventional loans.

Learn more:

• FHA cash-out refinance

• VA cash-out refinance

3. Streamline refinance

Streamline refinances are sometimes an option when you want to refinance into the same loan type as you currently have — for instance, from an old FHA loan to a new FHA one. The process for streamline refinances is intended to be faster and easier than with full refinances, and you usually won’t need a credit check or appraisal, which can reduce your closing costs and make it easier to get approved.

Streamline refinances are available on FHA, USDA, and VA loans (although VA loan streamline refinances are called IRRRLs — Interest Rate Reduction Refinance Loans).

Read more:

• FHA Streamline Refinance

• VA streamline refinance (IRRRL)

• USDA streamlined refinance

4. No-closing-cost refinance

Some lenders offer “no-closing-cost” refinances, which, as the name implies, require no up-front closing costs. These can save you on out-of-pocket cash initially, but you’ll still end up paying the closing costs in other ways. In most cases, your closing costs get rolled into your loan balance, resulting in a larger loan amount, higher monthly payments, and more long-term interest costs.

Sometimes, lenders will actually cover the closing costs for you, but they’ll charge you a higher interest rate instead. Either way, it’s important to run the numbers to determine if this type of mortgage refinance is right for you — especially if it results in more interest paid over the long haul.

• Learn how to get a low-cost refinance on your mortgage.

5. Cash-in refinance

A cash-in refinance is a lesser-known option for homeowners looking to lower their rate and payment or, in many cases, pay off their loan sooner. Think of it as the opposite of a cash-out refinance. A cash-out refi involves taking out a larger loan and receiving the difference in cash. With a cash-in refi, you refinance into a new loan that’s smaller than your current balance, making a large lump sum payment to do so.

This smaller balance can often help you snag a lower interest rate, and depending on the term you choose, it could lower your monthly payment. You could also use this refinance option to speed up your mortgage payoff. In this scenario, you might refinance into a shorter loan term — along with putting cash in — to pay off your mortgage loan sooner.

Cash-in refinances can be something to consider if you come into an unexpected financial windfall, like an inheritance, a large commission, or a bonus.

• Want to refinance your home loan in early 2026? What to know.

6. Short refinance

You might consider this type of refinance if you’re underwater on your mortgage, meaning you owe more on your mortgage loan than your home is currently worth.

With a short refinance, your lender agrees to let you refinance your current loan into a smaller one — more in line with your home’s current value. This would lower your monthly payment and, ideally, make covering your monthly payments easier.

Short refinances usually result in a financial loss to the lender, but they may cost less than pursuing foreclosure, which can take months or even years to finalize. Talk to your lender if this type of refinance is something you’re considering.

7. Reverse mortgage

A reverse mortgage isn’t technically a type of refinance, but it is an option if you need to take cash out of your home.

There are government-backed reverse mortgages — called Home Equity Conversion Mortgages (HECMs), which are for homeowners ages 62 and up, and there are reverse mortgages from private lenders. These sometimes allow borrowers to be as young as 55.

With reverse mortgages, you turn your home equity into cash. Your lender will either give you a lump-sum payment, send you regular monthly payments, extend you a credit line, or some combination of these options. In the meantime, you won’t make any payments. Instead, the reverse mortgage will need to be repaid when you pass away, sell the home, or move permanently off the property (into an assisted living facility, for instance).

Refinance requirements by mortgage type

The requirements for refinancing can vary quite a bit depending on what kind of mortgage loan you’re using, as well as the type of refinance. See below for a breakdown of what you’ll need to qualify for each category.

How to choose the best mortgage refinance option

The best mortgage refinance option is going to vary from homeowner to homeowner.

To choose the right strategy for you, you’ll want to take the following factors into account:

• Your financial goals: What are you trying to achieve with your refinance? A lower rate or payment? A quicker payoff timeline? Cash for home repairs? Your end goal can point you toward the right type of refinance for your situation.

• Your budget: Refinancing costs can vary widely depending on the type of refi you utilize — from absolutely no fees to tens of thousands of dollars, in the case of cash-in refinances. Determine what cash you have for the up-front costs of refinancing, and use that to zero in on which options might be best for that budget.

• The type of mortgage you currently have: Your current mortgage type will determine what refinancing options you have. If you have an FHA loan, for example, you’ll have a streamline refinance option at your disposal. The outstanding balance on your mortgage also plays a role (particularly in the case of cash-out refinances).

• Market conditions: Current interest rates and home prices should also factor into your decision. If rates have risen since you initially took out your loan, a rate-and-term refinance likely won’t be ideal. The same goes for home prices. If your home’s value has dropped, you may not have much equity, meaning a cash-out refinance isn’t an option.

If you’re not sure which refinancing option is right for you, talk to a mortgage professional or financial advisor. They can help you make the right choice for your financial goals and budget. You might also consider working with a mortgage broker. These are experts who can help you compare lenders and loan options to ensure you get the best deal. They can also assist with the application process.

• How often can you refinance your home?

Home refinance options FAQs

What is the most common refinancing option?

Rate-and-term refinances are the most common type of refinance. These allow you to replace your old loan with a new one that has a different rate, term length, or loan type.

How many types of refinances are there?

There are six types of mortgage refinance options: rate-and-term, cash-out, streamline, no-closing-cost, cash-in, and short refinances. A reverse mortgage is sort of a seventh type — though it isn’t technically a refinance. Instead, it offers a way to tap into your home equity and receive cash. The right loan choice depends on your financial goals and budget.

What are the alternatives to refinancing?

The alternatives to refinancing your mortgage depend on what your goals are. If you’re looking to pay off your loan sooner, you can simply make extra payments toward your principal balance or opt for biweekly mortgage payments instead of monthly ones. You can ask your lender about a loan modification or recast if you want a lower rate or payment. If you’re hoping to tap your home equity, you can look into second mortgages, like home equity loans and HELOCs.

Is it a good idea to refinance a mortgage?

Refinancing can often be a good idea if you need to lower your interest rate or monthly payment, pay off your loan sooner, eliminate mortgage insurance, or turn your home equity into cash. It depends on many factors, though, including your financial goals, your budget, current market conditions, and more. Talk to a mortgage professional if you’re not sure refinancing is right for you.

Is it a good idea to refinance a mortgage?

Refinancing can often be a good idea if you need to lower your interest rate or monthly payment, pay off your loan sooner, eliminate mortgage insurance, or turn your home equity into cash. It depends on many factors, though, including your financial goals, your budget, current market conditions, and more. Talk to a mortgage professional if you’re not sure refinancing is right for you.

What is the 2% rule for refinancing?

The 2% rule states that you should be able to reduce your interest rate by at least two full percentage points before refinancing. This isn’t a hard-and-fast rule, though. You should always run the numbers and see what any reduction would mean for your monthly payment, long-term interest costs, and household budget. It’s possible that a much smaller rate reduction may be beneficial.

Will we ever see a 3% mortgage rate again?

The 3% mortgage rates seen in 2020 and 2021 were driven by the COVID-19 pandemic and the Federal Reserve's economic stimulus measures during that period. It would likely take a major economic change for rates to reach that point again.

How much is a $100,000 mortgage at 6% for 30 years?

A $100,000 30-year loan at a 6% interest rate would come with a monthly payment of about $600. Over the course of your loan term, you’d pay nearly $216,000, including interest.

Laura Grace Tarpley edited this article.

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