No cash-out refinance: A guide

If you already own a home and are considering refinancing, you may have heard of a no cash-out refinance. Since everyone’s refinancing¹ situation looks different from borrower to borrower, it’s crucial to understand what no cash-out refinancing means and its advantages before moving forward.

We’ll break down how it can be used so you can decide if it’s right for your unique situation.

What is a no cash-out refinance?

A no cash-out refinance, also called a rate and term refinance, is a type of mortgage refinancing loan where you don’t take any money out of your home’s equity. The new loan is used purely to pay off the remainder of your existing mortgage, letting you adjust the term and/or interest rate of the loan.

People often do this to lower their interest rate, which can help them save money over the long run, though you must pay closing costs when you do a no cash-out refinance.

Cash-out refinance vs. no cash-out refinance

With a no cash-out refinance, you refinance only what you still owe on your home—nothing more. A cash-out refinance works differently: if you have equity in your home, you can refinance for a higher amount and pocket the difference. Many borrowers use that extra cash to make home improvements or pay off other bills.

There's also an option that falls in the middle called a limited cash-out refinance. With this, you can refinance for a slightly higher amount and receive up to $2,000 in additional cash.

How does a no cash-out refinance work?

A no cash-out refinance is one of the simpler types of refinancing because it involves changing only the loan’s term length and interest rate. Some homeowners do a no cash-out refinance to lower their monthly payment amount by reducing their interest rate. Other homeowners use it to take on a larger monthly payment to pay their mortgage off sooner.

With a no cash-out refinance, your home serves as collateral for the new loan. If you fail to make your mortgage payments, your lender has the right to foreclose on the property and sell it to recover the outstanding loan balance.

Pros and cons of no cash-out refinancing

No cash-out refinancing can be useful for people who have a mortgage with a high mortgage rate and want to lower it without taking any money out of their equity. This type of refinancing is not right for every situation, so keep these pros and cons in mind.

Pros

Refinancing is an important decision that can have a significant impact on a person’s financial situation. Here are some of the reasons that people choose to do a no cash-out refinance:

• Lower your mortgage payment: In some cases, a no cash-out refinance allows homeowners to lower their monthly mortgage payment. Keep in mind that refinancing to a mortgage term that is longer than your original term may increase the overall cost of your loan due to interest.
• Change the loan details: If your current mortgage has unfavorable details such as high interest rates, private mortgage insurance (PMI), or a long term, you may want to do a no cash-out refinance.
• Change lenders: Some homeowners take out a mortgage and end up not having a good relationship with their lender. Refinancing allows you to change lenders.

Cons

Refinancing isn’t for everyone. Here are a few potential drawbacks of no cash-out refinancing:

• No money advanced: Some people choose to refinance their homes so that they can use their home equity to pay off other debts or make home improvements. A no cash-out refinance won’t give borrowers any cash to work with, so they may need to use a home equity loan² or home equity line of credit (HELOC) for home projects.
• A lower interest rate may not save you money: Some homeowners think that if they get a lower interest rate by refinancing, they’ll save money over time. However, if you choose to refinance at a similar or longer term than your existing mortgage, you may end up paying more in interest over the life of the loan than if you kept your original mortgage.
• May extend your debt: Refinancing can be an excellent way to get better terms on a mortgage or get yourself out of a difficult situation. However, if you refinance at a longer term or make a habit of refinancing, you may end up with a lifetime of debt.

Eligibility requirements for no cash-out refinances

When you apply for any kind of loan, your lender will check your finances and your credit history to make sure you’re a trustworthy borrower. These are the main requirements to qualify for a no cash-out refinance.

Credit score

Just like when you applied for your original mortgage, your lender will check your credit report and look at your credit score. The minimum score required will depend on the type of loan you apply for. For example, most conventional refinance mortgages have a minimum credit score of 620.

If your credit score has dropped since you got your mortgage, you may not be able to qualify for a refinance. It’s important to make sure you keep your credit as healthy as possible. Some steps to take before applying for the new loan include paying down credit card and other debt and avoiding applying for new loans.

Beyond your ability to qualify for a loan, your credit will also influence the interest rate, which can impact the cost of your mortgage. You can use this refinance calculator from Rocket Mortgage® to see how your credit score will impact your mortgage payment.

DTI

A borrower’s DTI plays a role in their eligibility for a no cash-out refinance as well. For example, if a person has taken on a lot of debt since purchasing their home, they may not be eligible for a new loan. Additionally, if a person’s or couple’s income has fallen significantly since they took out their original mortgage, they may not be eligible for a refinance.

Before you attempt to do a no cash-out refinance, you should try to decrease your debt-to-income ratio. This might mean paying off a student loan or an auto loan or waiting until you increase your income.

Home equity

The amount of home equity a borrower owns can influence their eligibility for a no cash-out refinance. If you borrow over 80% of your home’s equity, you may be required to pay PMI. This additional expense can negate the financial benefit of refinancing. Additionally, some companies may require homeowners to have a minimum of 20% equity in their home before offering a mortgage refinance.

Can you get denied for a no cash-out refinance?

If you don’t meet the minimum requirements, your application for a no cash-out refinance may not be approved. It’s important to know the requirements and your financial situation ahead of time so that you can make any improvements to your finances before applying for a no cash-out refinance.

The bottom line: Refinancing with no cash out may lower your mortgage payment

Refinancing your mortgage may allow you to adjust details such as its interest rate and repayment term. If you refinance without taking any cash out of your home equity, you may be able to lower your mortgage payment. Just keep in mind that you’ll pay closing costs and other upfront fees, so make sure the ongoing savings are worth the upfront cost.

If you’re ready to refinance your mortgage, you can apply for a refinancing loan with Rocket Mortgage^® today.

¹ Refinancing may increase finance charges over the life of the loan.

² Home Equity Loan product requires full documentation of income and assets, credit score and max loan-to-value (LTV), combined loan-to-value (CLTV), and home equity combined loan-to-value (HCLTV) ratios. Requirements were updated 11/19/25 and are tiered as follows: 680 minimum FICO with a max LTV/CLTV/HCLTV of 80%, 700 minimum FICO with a max LTV/CLTV/HCLTV of 85%, and 740 minimum FICO with a max LTV/CLTV/HCLTV of 90%. Your debt-to-income ratio (DTI) must be 50% or below. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Product is a second standalone lien and may not be used for piggyback transactions. Product not available on Ameriprise products. Guidelines may vary for self-employed individuals. Some mortgages may be considered “higher priced” based on the APOR spread test. Higher priced loans are not allowed on properties located in New York. Additional restrictions apply. This is not a commitment to lend.