Home refinancing can be a powerful financial tool, whether you're lowering your rate, tapping into equity, or adjusting your loan terms. But not all refinance loans are the same. Understanding the different types of home refinancing helps you choose the best option for your goals and long-term savings. In this guide, we break down the main refinance types, when to use each, and what to expect in the process.

What is home refinancing?

Home refinancing is the process of replacing your existing mortgage with a new one — usually to lower your interest rate, reduce your monthly payment, or access your home’s equity. It’s similar to getting a mortgage when you first bought your home, but the purpose is to improve your financial situation based on current market conditions and your goals.

The right type of home refinancing depends on why you're refinancing. Some homeowners want to reduce monthly costs. Others want to shorten the loan term or get cash out for renovations or debt consolidation. Lenders offer different refinance programs depending on your existing loan and financial profile.

The main types of home refinancing

Let’s explore the most common refinance types and how each works.

#1: Rate-and-term refinance

A rate-and-term refinance changes the interest rate, loan term, or both — without increasing your loan balance. This is the most popular form of home refinancing and is often used to:

• Lock in a lower interest rate
• Switch from an adjustable-rate mortgage (ARM) to a fixed-rate loan
• Change loan length (e.g., from a 30-year to a 15-year mortgage)

You can also use this option to remove a co-borrower or switch loan servicers. It doesn’t provide access to home equity, but it can reduce total interest paid over time or help you pay off your home faster.

#2: Cash-out refinance

A cash-out refinance lets you borrow more than you owe on your current mortgage and pocket the difference in cash. This type of home refinancing is commonly used to:

• Pay for home improvements or repairs
• Consolidate higher-interest debt
• Fund major expenses like college tuition or medical bills

To qualify, you'll typically need at least 20% equity in your home, and lenders may have stricter credit and appraisal requirements. Your new loan will be larger than your current mortgage, so monthly payments and total interest costs could increase — especially if rates have risen.

#3: Streamline refinance

Streamline refinancing is a simplified process for borrowers with government-backed loans like FHA, VA, or USDA mortgages. It offers:

• Reduced documentation requirements
• No appraisal or income verification in many cases
• Faster approval and lower closing costs

There are three main types of streamline refinancing:

• FHA Streamline: Designed for borrowers with existing FHA loans
• VA IRRRL (Interest Rate Reduction Refinance Loan): For veterans with VA loans
• USDA Streamlined Assist: For homeowners with USDA-backed mortgages

Streamline options generally must result in a tangible benefit, such as a lower interest rate or monthly payment. You usually can’t take cash out with these programs.

Other types of home refinancing

While less common, these specialized refinance options may suit unique situations.

#4: Cash-in refinance

A cash-in refinance is the opposite of a cash-out. You bring cash to the table to reduce your loan balance. This can help you:

• Qualify for a better interest rate
• Avoid mortgage insurance by reducing your loan-to-value (LTV) ratio
• Pay off your mortgage faster

This option is often used when homeowners want to reach a specific financial threshold, such as hitting 80% LTV or moving to a 15-year term.

#5: No-closing-cost refinance

In a no-closing-cost refinance, the lender pays your closing costs in exchange for a slightly higher interest rate. This reduces your upfront expenses but increases your long-term interest payments. It's ideal if:

• You plan to move or refinance again within a few years
• You don’t have the cash to cover closing costs out of pocket

It’s important to compare the long-term cost of a higher rate to the short-term savings at closing.

#6: Conventional-to-FHA (or vice versa) refinance

Some homeowners refinance from a conventional loan to an FHA loan to qualify with more flexible credit guidelines. Others refinance from FHA to conventional to remove mortgage insurance once they have enough equity. This type of refinance is goal-specific and depends heavily on your home’s current value and credit standing.

Choosing the right refinance for your goals

Each type of home refinancing serves a different purpose. Here's how to match your goal with the best option:

• Lower my monthly payment: Rate-and-term refinance or streamline refinance
• Pay off my home faster: Rate-and-term refinance to a shorter term or cash-in refinance
• Get cash for renovations: Cash-out refinance
• Refinance without a lot of paperwork: FHA, VA, or USDA streamline refinance
• Avoid upfront fees: No-closing-cost refinance
• Drop mortgage insurance: Conventional refinance (from FHA) with 20%+ equity

Always weigh the trade-offs of interest rate, fees, loan term, and total loan amount before moving forward.

How to prepare for a refinance

No matter which type of home refinancing you're considering, preparation is key. Here's what to do before applying:

• Check your credit: Higher scores generally get better rates.
• Know your equity: Most lenders want at least 20% equity for a cash-out refinance.
• Gather documents: You’ll need income, tax, and mortgage statements for full refinances.
• Compare lenders: Rates and fees can vary widely, even for the same loan type.
• Calculate your break-even point: Know how long it will take to recover the costs of refinancing.

The more informed you are, the more likely you are to choose a refinance that saves you money and aligns with your financial goals.

Exploring your home refinancing options

Home refinancing isn’t one-size-fits-all. Whether you want to reduce your interest rate, access your equity, or simplify your mortgage, there’s a refinance option designed for your needs. Understanding the different types of home refinancing empowers you to choose the best path forward, especially when market conditions and loan programs change frequently.

Taking the time to compare your options could save you thousands over the life of your loan.

Thinking about refinancing? Compare personalized refinance rates today at Rates.Now and find the right loan to meet your financial goals.