No Cash-Out Refinance: A Guide

Sep 9, 2024

4-minute read

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

What Is A No Cash-Out Refinance?

A no cash-out refinance is when you refinance your existing mortgage for less than or equal to the current loan balance, plus any additional loan settlement costs. It’s considered a rate and term refinance because you’re not borrowing new money; however, it can give you the ability to lower your interest rate or shorten your loan term.

Cash-Out Refinance Vs. No Cash-Out Refinance

In contrast to a no cash-out refinance, in which the lender only refinances an equal to or lesser amount of the remaining loan balance, a cash-out refinance is when a person has equity in their home and chooses to refinance a higher principal amount. The additional principal is often used to improve the home or cover other important costs.

There are also limited cash-out refinances, in which the lender refinances at a higher principal amount and gives the borrower a maximum additional $2,000.

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