Looking to Refinance Your Mortgage? These 6 Options Offer Different Wins
May 20, 2025
6 min read
If you’ve noticed home prices climbing and mortgage rates hitting historic lows, you might be asking yourself, Is now the time to refinance? The answer? It just might be. Refinancing could be the savvy financial move that helps you save money, lower your monthly payments, or tap into the equity you’ve built in your home.
But here’s the thing—refinancing isn’t just about chasing the lowest interest rate (although that’s definitely a bonus). It’s about finding a solution that aligns with your financial situation and goals. Maybe you want to pay off your mortgage faster, cut down on monthly expenses, or free up cash for something important. Whatever your objective, there’s likely a refinancing option tailored to you.
I’m walking you through six types of mortgage refinances and what kind of wins they offer—depending on the life you're living and the future you're aiming for.
1. Rate-and-Term Refinance
This is the classic refinance you’ve probably heard mentioned most. A rate-and-term refinance lets you change your mortgage interest rate, your loan term (length), or both—without touching your home equity. It’s the go-to option if you’re trying to lower your monthly payment or shorten your loan term to pay off your home faster.
I chose this route when I realized my original loan had a significantly higher interest rate than what was available a few years later. Locking in a lower rate helped me cut down my monthly payment without extending my payoff date.
A good fit if:
- Your credit score has improved since you got your original loan.
- Rates have dropped since you first borrowed.
- You’re looking to switch from an adjustable-rate to a fixed-rate mortgage for stability.
Keep in mind: There are closing costs—usually around 2% to 6% of your loan balance. So it’s worth doing the math to see how long it’ll take to break even based on your monthly savings.
Weekly Nugget: Sometimes saving money means playing the long game. Refinancing isn’t always about instant wins—it’s about cumulative impact.
2. Cash-Out Refinance
A cash-out refinance lets you tap into your home’s equity by replacing your current mortgage with a larger one and pocketing the difference in cash. It’s commonly used for major expenses like home renovations, debt consolidation, or covering education costs.
Let’s say your home is worth $400,000 and you owe $250,000. With a cash-out refinance, you might refinance into a $300,000 loan, paying off the original $250,000 mortgage and receiving the remaining $50,000 in cash (minus fees).
This type of refinance can be incredibly useful—but it comes with responsibility. You’re borrowing against your home, so the stakes are high.
A good fit if:
- You have significant home equity.
- You’re using the cash for something that strengthens your finances (not a luxury vacation).
- You’re comfortable with potentially higher monthly payments.
Not ideal if you’re already feeling financially stretched. That lump sum might look good now, but it’s tied to your biggest asset.
3. Streamline Refinance
If your current mortgage is a government-backed loan (like FHA, VA, or USDA), you may qualify for a streamline refinance—aka the low-documentation, low-hassle version of refinancing.
These are designed to be faster and cheaper than traditional refinances. In many cases, you won’t need an appraisal, and the income verification is less intense. The idea is to make it easier for borrowers to take advantage of better rates.
Streamline refinances are great if you just want to lower your interest rate or monthly payment without changing the loan type. But you can’t take out cash with this method.
A good fit if:
- You already have a government-backed mortgage.
- You don’t need cash from your equity—just better terms.
- You want a faster, paperwork-light experience.
A small note: You usually need to be current on your loan and have a good payment history to qualify.
Weekly Nugget: Ease doesn’t always mean less value. The most straightforward financial decisions are sometimes the smartest.
4. Cash-In Refinance
This one isn’t talked about as much, but it can be surprisingly strategic.
A cash-in refinance is the opposite of a cash-out—you bring money to the closing table to pay down your mortgage balance. Why would anyone do that? Because it can help you qualify for better rates, reduce your monthly payment, or eliminate private mortgage insurance (PMI) if you're under that 20% equity mark.
It can also help you move into a shorter-term loan without the monthly payment jumping too high.
A good fit if:
- You have savings set aside and want to put it to productive use.
- You’re trying to reach 20% equity to remove PMI.
- You want to reduce your loan balance faster and save on interest.
This isn’t a flashy move—it’s a thoughtful one. If you’re sitting on idle cash, using it to boost your home equity could be one of the most stable financial plays you make.
Weekly Nugget: Not all progress feels dramatic. Sometimes it’s the quiet financial moves that create the most freedom later.
5. Shortening Your Loan Term
If your main goal is freedom from mortgage debt sooner rather than later, refinancing into a shorter loan term (say, 30 years to 15) could be your win.
You’ll pay less interest over the life of the loan and own your home outright years earlier. The trade-off? Your monthly payment might go up—though if you’re locking in a lower interest rate at the same time, it may not rise by much.
This type of refinance isn’t just about money—it’s about mindset. It’s for people who value the security of being mortgage-free and are willing to prioritize that in their budget.
A good fit if:
- Your income has increased, and you can comfortably afford higher payments.
- You’re financially stable and want to focus on long-term wealth-building.
- You’re eyeing retirement and want to eliminate debt beforehand.
Before going this route, check your other financial priorities (like retirement savings and emergency funds). Paying off a mortgage faster is wonderful—but not if it leaves you cash-strapped.
6. No-Closing-Cost Refinance
Let’s talk about closing costs—the quiet little party crashers of refinancing. These are the fees (typically 2% to 6% of your loan amount) that cover things like appraisals, title searches, and lender charges. And while they’re standard, they can feel like a financial speed bump—especially if your cash flow is tight right now.
Enter the no-closing-cost refinance, which—despite sounding like a marketing gimmick—is a real option. The catch? Those fees don’t disappear. They’re just redistributed.
A good fit if:
- You need lower monthly payments but can’t afford a big upfront outlay.
- You’re planning to move or refinance again in the next few years.
- You want to take advantage of rates now, without draining your emergency fund.
This type of refinance can be smart—if you understand the long-term trade-offs. You’ll likely pay more in interest over time, so it only really works in your favor if you’re not staying in the home forever.
The Bottom Line
There’s no universally perfect refinance option. Just the one that aligns with your life, your money, and your future.
What feels like the best move for someone else might not serve your priorities—and that’s okay. You’re allowed to ask questions, take your time, and choose the version that creates the most peace (and potential) for you.
Refinancing is rarely just about the numbers. It’s about control, clarity, and choice. And you deserve to feel confident making that choice in a way that honors both your financial goals and your daily life.
If you’re standing at that refinance crossroads—curious, cautious, maybe a little overwhelmed—take a breath. Ask the real questions. Run the math. And then decide from a place of knowledge, not pressure. Because this? This is your home. Your money. Your move.
