Cash Out vs. No Cash Out Refinances

Learn the Differences Between Them!

You are typically able to choose between two main types of home refinances: cash out refinances (that allow you to get cash from the value of your home’s equity) and no cash out refinances (i.e., rate-and-term refinances that allow you to change the interest rate and terms of your current mortgage without taking cash from your equity).

What Is a Cash Out Refinance?

A cash out refinance allows you to access cash from your home’s equity. For example, you might be able to refinance a mortgage for $200,000 to a new mortgage for $250,000 and get $50,000 in cash back at closing, depending on the equity you have in your home. Equity is the difference between what your home is worth in the current market and the remainder of the balance you have left to pay on it. You can borrow the difference and finance it into your mortgage.

The primary benefit of cash out refinances is the cash you receive that can be used for expenses like home renovations, college tuition, or debt consolidation. Cash out refinances increase the principal balance of your mortgage. They often increase the amount of your monthly payments and the amount of interest you'll pay over the life of the loan.

A cash out refinance lets you change your interest rate and terms, just like a no cash out refinance. For example, if you have 25 years left on your current mortgage, a cash out refinance can allow you to get cash and increase your mortgage term to 30 years.

What Is a No Cash Out Refinance?

A no cash out refinance is also called a rate-and-term refinance or simply a mortgage refinance. You'll replace your current mortgage with a new mortgage that has a lower rate or better terms. Homeowners most often choose a no cash out refinance when they can get a new interest rate that is significantly lower than the rate on their current mortgage.

The primary benefit of no cash out refinances is that you can lower your monthly payment or save money on interest over the life of the loan. This type of refinance does not increase the principal balance of your mortgage. You also may be able to refinance your mortgage to the same term as your existing mortgage, which means you will not increase the amount of interest you’ll pay over the life of the loan. This type of refinance does not increase your monthly payment, either, unless you choose to reduce your loan term.

For example, if you have 25 years left on your mortgage, and you decide to reduce your mortgage’s term to 15 years, this choice might increase your minimum monthly payments. However, a higher monthly payment, in this case, can help you pay off your mortgage sooner and save more money in interest.

Last reviewed and updated May 2025 by Freedom Mortgage.