The most common types of mortgage refinance options are offered by conventional lenders, as well as lenders approved by the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) and U.S. Department of Agriculture (USDA).
Rate-and-term refinance loans. Most homeowners choose this type of refinance to lower their rates or pay off their loans faster. One major perk: You can roll in your closing costs even if you have little to no equity in your home.
Cash-out refinance loans. With a cash-out refinance, you borrow more than you currently owe and pocket the difference between the two loans in cash. One drawback: You can’t borrow more than 80% of your home’s value unless you’re eligible for a VA cash-out refinance.
Streamline refinance loans. The streamline refinance option is exclusive to homeowners with government-backed loans from the FHA, VA or USDA, and typically doesn’t require a home appraisal or income documentation. To qualify, you must currently have an FHA, VA or USDA loan and prove the refinance will benefit you financially.