There are seven types of refinancing, and the right one is decided by your goal and your equity rather than by the rate in an ad. On a one-unit primary residence, a conventional cash-out refinance stops at 80% loan-to-value, a conventional rate-and-term refinance can reach 95%, and FHA, VA, and USDA streamline refinances usually skip the appraisal altogether.

Choose the wrong structure and you pay for equity you never needed to touch, or an appraisal you never needed to order. Learn how each type of refinancing works, what equity and seasoning each requires, and which one matches the goal you actually have.

Key takeaways:

• Equity picks the product before rate does: A conventional rate-and-term refinance can reach 95% loan-to-value on a one-unit primary residence, while conventional and FHA cash-out refinances both stop at 80%.
• Government loans have a shortcut: FHA, VA, and USDA streamline refinances generally require no new appraisal, and the FHA version limits cash back at closing to $500.
• Shop the type first, then the price: Every refinance type is priced differently at every lender, which is why Align Lending runs the same file across more than 75 wholesale lenders before you commit to one.

What are the seven types of refinancing?

Every refinance replaces your existing mortgage with a new loan. The seven types differ in three ways only: what happens to the balance, whether a new appraisal gets ordered, and how the closing costs get paid. Our refinancing and home equity guide covers the process end to end; this hub covers the menu.

Refinance type	Best for	Equity typically needed	New appraisal?	How the costs get paid
Rate-and-term	Lower rate, shorter term, or leaving an ARM	Up to 95% LTV conventional	Usually yes	Cash, rolled in, or lender credit
Cash-out	Turning equity into money	80% LTV ceiling, conventional and FHA	Yes	Usually rolled into the new balance
Cash-in	Dropping mortgage insurance or improving pricing	You add equity at closing	Usually yes	Cash at closing
Streamline (FHA, VA, USDA)	Lowering the payment on a government loan	Not measured	Usually no	Rolled in or lender credit
No-closing-cost	A short expected stay in the home	Same as the underlying type	Depends on the type	Higher rate or a larger balance
Renovation	Financing improvements into the loan	Underwritten to as-completed value	Yes, as-completed	Rolled into the loan
Reverse (HECM)	Owners 62 and older converting equity to income	Substantial equity	Yes	Financed into the loan

Two facts narrow that list fast. Your current loan type decides whether the streamline row is open to you, and your loan-to-value ratio (LTV), the new loan amount divided by the home’s value, decides whether cash-out is. Everything after that is pricing, which is exactly what a broker shops. The mechanics of running any of these live in our refinancing guide.

Rate-and-term refinance: change the rate, the term, or both

A rate-and-term refinance changes your interest rate, your loan term, or both, while the balance stays essentially where it was, and on a one-unit primary residence, conventional guidelines allow it up to 95% LTV. It is the cheapest refinance to underwrite, because the lender’s exposure doesn’t grow, and on a conventional loan it’s the structure that still works when equity is thin.

Three goals send homeowners here: lowering a payment, escaping an adjustable rate before it adjusts, and compressing a 30-year loan into a 15- or 20-year term. That last one deserves its own math, because the rate usually falls while the payment rises. The full case is laid out in the benefits of a rate-and-term refinance, and the trade-off is worked through in refinancing to a shorter loan term.

One caution the industry rarely volunteers: restarting a 30-year clock 20 years in can raise lifetime interest even at a lower rate. Ask for 15- and 20-year quotes alongside the 30-year and compare total interest, not just the payment. As a broker, we price all three terms at several lenders from one application.

Cash-out and cash-in refinances: two ways to move equity

These two are mirror images. A cash-out refinance replaces your mortgage with a larger one and hands you the difference at closing, capped at 80% LTV on a one-unit primary residence under both conventional and FHA guidelines. A cash-in refinance does the opposite: you bring money to closing to shrink the balance.

The arithmetic on the cash-out side is simple. On a home valued at $350,000 with a $200,000 payoff, an 80% ceiling puts the new loan at $280,000, roughly $80,000 in reach before closing costs and any escrow adjustments.¹ Start with what a cash-out refinance loan is, walk the mechanics in our guide to cash-out refinancing, and read the honest ledger in the pros and cons of cash-out refinancing before you commit. You are converting equity into debt secured by your house, and that trade is real.

Seasoning applies here in a way it doesn’t on rate-and-term loans. Conventional guidelines require at least one borrower on title for six months before disbursement, and the first mortgage being paid off is generally at least 12 months old, note date to note date. FHA requires 12 months of ownership and occupancy as your principal residence before case number assignment. VA cash-out runs on its own rules: the VA won’t guarantee a refinance whose loan-to-value exceeds 100% of the property’s reasonable value, including any financed funding fee.²

Cash-in refinancing gets ignored because writing a check feels backwards. It earns its place twice: crossing below 80% LTV to eliminate private mortgage insurance, and pulling a jumbo balance under the conforming limit for better pricing. If your current rate already beats the market, though, borrowing behind the first mortgage usually wins, our home equity hub compares cash-out against a home equity loan and a HELOC line by line.

Streamline refinances: the FHA, VA, and USDA shortcut

Streamline refinances are reduced-documentation programs for loans the government already insures or guarantees, and they are the fastest closings in the business precisely because there is usually no appraisal and no equity test. If your loan is FHA, VA, or USDA, start here before you look at anything else. Our guide to streamline refinancing sorts out which version applies to you.

• FHA streamline: HUD requires that at least six payments have been made on the mortgage being refinanced, that at least six full months have passed since its first payment due date, and that at least 210 days have passed since its closing date. The refinance also has to deliver a documented net tangible benefit, and cash back at closing is capped at $500. See FHA streamline refinance loans for the credit-qualifying and non-credit-qualifying versions.³
• VA IRRRL: The VA Interest Rate Reduction Refinance Loan is seasoned on the later of two dates, six consecutive monthly payments made, and 210 days after the first payment due date. The funding fee on an IRRRL is 0.5% of the loan amount, against 2.15% for a first-use VA cash-out refinance, and borrowers receiving VA compensation for a service-connected disability are exempt. Details live in our guide to VA interest rate reduction refinance loans.
• USDA streamlined-assist: The USDA option asks that the mortgage have been paid as agreed for the 12 months before application and that the new loan cut the payment by at least $50 a month. In exchange, it generally waives the appraisal, the credit report, and the debt-to-income calculation on a 30-year term. See what a USDA streamline refinance is.

Because Align is a broker rather than a bank, we place VA and USDA streamlines through partner lenders that specialize in them. Plenty of retail branches don’t originate the USDA product at all.

No-closing-cost and renovation refinances

These two are less separate programs than different ways of paying for one. A no-closing-cost refinance covers your fees through a lender credit tied to a higher rate, or by adding them to the balance. It isn’t free, it’s financed, and it wins in one situation: when you expect to sell or refinance again before a paid-cost loan would have broken even.

Renovation refinances underwrite to the home’s after-improved value, which is what makes them work when current equity is thin. Fannie Mae’s HomeStyle Renovation limits renovation costs to 75% of the as-completed appraised value on a refinance, and its lighter HomeStyle Refresh option finances eligible improvements up to 15% of that value. On the FHA side, a Limited 203(k) caps total rehabilitation costs at $75,000 for minor, non-structural work, while the Standard 203(k) handles structural projects and requires at least $5,000 in rehabilitation.

Reverse mortgages sit at the far end of the menu. A Home Equity Conversion Mortgage requires every borrower to be 62 or older and converts equity into payments rather than the reverse. It fits a narrow group of homeowners and belongs with a HUD-approved counselor before a loan officer.

Which type of refinancing fits your goal?

Work backward from the outcome you want, because each goal maps to one or two structures and rules out the rest.

• Lower the payment: Rate-and-term if your loan is conventional; a streamline if it’s FHA, VA, or USDA. Both leave your balance roughly intact.
• Pay the house off sooner: Rate-and-term into a 15- or 20-year term. Expect the payment to rise even as the rate falls.
• Pull cash out: Cash-out to 80% LTV, or a second mortgage if your existing rate is better than today’s market and you’d rather not reprice the whole balance.
• Drop mortgage insurance: Cash-in to cross 80% LTV, or a refinance out of FHA into conventional on FHA case numbers assigned on or after June 3, 2013, mortgage insurance lasts the life of the loan when the loan started above 90% LTV, which covers most FHA borrowers.
• Fund a renovation: Cash-out if you already have the equity; a renovation refinance if you don’t, since the appraiser values the home as it will exist when the work is finished.
• Get out from under a hardship: Streamline products don’t test equity, which solves more of these than people expect. When the file is genuinely underwater, how to refinance with negative equity covers what’s left, and our refinance situations hub handles the rest. If the loan is in active default, your servicer’s loss-mitigation team is the right call, not a refinance, and we’ll say so.

What Michigan homeowners should know

Four Michigan specifics change which refinance type pencils out, and the first can quietly add thousands to a payoff.

• MSHDA assistance is a second lien that comes due: If you bought with a MSHDA MI Home Loan and took down payment assistance, that help is a deferred second mortgage that generally becomes payable when the first mortgage is paid off or refinanced. Get the written payoff figure before you choose a refinance type. It belongs in the break-even math from day one.
• No transfer tax on a refinance: Michigan’s real estate transfer tax runs $8.60 per $1,000 of sale price. $7.50 state plus $1.10 county, but it is triggered by a change of ownership. Refinancing your own home doesn’t transfer title, so the tax doesn’t apply, which keeps Michigan refinance costs below what homeowners pay in mortgage-tax states.
• A low fixed rate argues for a second mortgage: Plenty of Michigan homeowners hold first-mortgage rates well under today’s market. For them a home equity loan or HELOC usually beats a cash-out refinance: it leaves the low rate untouched and closes for a fraction of the cost.
• Winter appraisals need documentation: On any type that requires an appraisal, a January or February inspection can be complicated by snow. Leave dated photos and receipts for recent improvements so the season doesn’t cost you value.

FAQ: Types of refinancing

Here are answers to common questions about the types of refinancing.

How do I know which type of refinancing I qualify for?

It comes down to two facts you already have. Your current loan type decides whether a streamline is available, and your loan-to-value ratio decides whether cash-out is. 80% is the conventional and FHA ceiling on a primary residence. Credit and income mostly affect pricing, not which structures are on the table. Our guide to refinancing eligibility walks the thresholds lender by lender.

Can I switch loan types when I refinance?

Yes, and it’s one of the better reasons to refinance at all. Homeowners move from FHA to conventional to shed mortgage insurance that, on a loan that started above 90% LTV, otherwise lasts the life of the loan, from adjustable to fixed for stability, and occasionally from conventional into a government program when credit has slipped. Each direction has its own qualifying rules. See refinancing to remove mortgage insurance for the most common version of this move.

Does every type of refinancing require an appraisal?

No. FHA, VA, and USDA streamline refinances generally proceed without one, and many conventional refinances with strong equity qualify for an automated appraisal waiver. Cash-out, cash-in, and renovation refinances almost always require a full appraisal, since the value is what the loan amount is measured against. Our overview of what a streamline refinance is explains why the appraisal can be skipped.

Can I refinance again later if I pick the wrong type?

Usually, yes. There’s no legal limit on how many refinances you can do, though seasoning rules set the earliest date and each one carries closing costs of roughly 2%, 6% of the loan amount. That’s the real constraint: a second refinance inside two years rarely clears its own break-even test. Price them first in our breakdown of refinancing closing costs.

The bottom line on types of refinancing

Seven types of refinancing cover nearly every homeowner situation, and equity sorts them faster than rate does: rate-and-term reaches 95% LTV on a conventional one-unit primary residence, conventional and FHA cash-out both stop at 80%, and FHA, VA, and USDA streamline refinances skip the appraisal and the equity test entirely. Cash-in buys you out of mortgage insurance, no-closing-cost trades a higher rate for zero cash at the table, and renovation refinances underwrite to the home’s after-improved value. Start from the goal, and the product picks itself.

If you’re ready to find out which refinance type actually fits your file, talk to Align Lending, we’ll shop your scenario across our lender network and show you the numbers side by side. Call 248-506-5727 or start online today.

This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Consult a qualified professional about your situation. Program terms, loan-to-value limits, fees and seasoning rules shown are illustrative, are not a rate quote or an offer of credit, and are subject to lender overlays and change. Align Lending works with FHA- and VA-approved lenders and is not acting on behalf of, endorsed by, or sponsored by FHA, HUD, the Department of Veterans Affairs, or USDA.

Footnotes:

1. Example figures are hypothetical and for educational purposes only; they do not constitute an advertisement of credit terms or a rate quote under federal or state lending laws. Your rate and terms will depend on your application and market conditions. Back
2. Align Lending works with VA-approved lenders and is not endorsed or sponsored by the Department of Veterans Affairs or any government agency. Back
3. Align Lending is not acting on behalf of or at the direction of FHA or HUD. Back