Need money in your pocket? If you’re an existing homeowner, you could be at an advantage. 

In Q2 2025, American homeowners with mortgages held nearly $35.8 trillion in home equity—up more than 72% ($15+ trillion) compared to just five years prior in Q2 2020.¹ Refinancing could help you tap into your home equity to pay for other things—or, it could simply help you lower your monthly mortgage payments or adjust your rate term to save over the life of your loan

When most people consider refinancing their mortgages, they probably first and foremost think about lowering their interest rate—but that’s just one piece of the puzzle. The truth is that refinancing can be a powerful tool to help you reach a wide variety of long-term financial goals.

What are some of the benefits of refinancing?

• Consolidate high-interest debt: Refinancing could help you pay off higher-interest debts including personal loans, credit cards, or student loans. With a cash-out refinance, you may be able to use your equity to pay off those debts. While your mortgage balance will be higher, it may be at a lower interest rate than when the debts were incurred.
• Create breathing room in your monthly budget: You may be able to lower your monthly mortgage payments on your mortgage if you qualify for a lower interest rate—but that’s not your only option to increase your short-term cash flow. You may be able to lengthen the term of your loan, spreading out your balance over a longer period and reducing the amount you pay monthly. While this can increase the total cost of the loan, some borrowers may feel that is an acceptable cost for a lower monthly payment.
• Save money over the life of your loan: Lowering your interest rate or shortening your loan term could help you save money on your mortgage in the long run by cutting down the time you are paying interest.
• Tap into your home equity to help cover other expenses: Refinancing options such as a cash-out refinance could help you pay for things like education, home renovations, or investment properties.

Regularly reassessing your home loan is an important practice to remain aligned with your long-term financial goals. Here are some different types of refinancing options to consider, so you can make sure your mortgage is always working for you.

What types of refinancing options are there?

• Rate-and-term refinance: A type of mortgage where you replace your existing home loan with a new one that has a different interest rate and/or loan term.
• Cash-out refinance: A type of mortgage that replaces your existing mortgage with a larger loan by tapping into existing home equity, allowing you to take the difference in a cash lump sum.
• Cash-in refinance: A type of mortgage where you make a large, one-time payment toward your existing mortgage principal while also replacing it with a new loan that could carry a new rate and/or term.
• Streamline refinance: A simplified way to refinance an existing FHA² or VA³ mortgage with reduced paperwork and fewer requirements.

What are some benefits of each type of refinancing?

• Rate-and-term refinance::
  • Adjusting your mortgage rate and term could help you lower your monthly mortgage payments, save money on the overall life of the loan, or pay off your home sooner.
  • If you have an adjustable-rate mortgage (ARM), you may have the option to switch to a fixed-rate mortgage for more long-term payment stability.
• Cash-out refinance:
  • You can use the money any way you please—pay down higher-interest debt, pay for education, complete home improvement projects, or invest and save for the future.
  • Favorable rates could potentially bring down your monthly mortgage payments.
  • While the processing of any loan incurs closing costs, you may be able to roll them into your new loan or pay them outright—whichever works better for you. This applies to rate and term refinances as well.
• Cash-in refinance:
  • Similarly to a rate-and-term refinance, this could help lower your monthly mortgage payments, save money over time on your mortgage, or shorten the life of your loan.
  • If your original loan had a high loan-to-value ratio (LTV), you might have been paying for private mortgage insurance (PMI). Reducing your LTV to below 80% (meaning you’ve paid off at least 20% of the principal) means you could possibly eliminate the requirement to pay for PMI every month.
• Streamline refinance:⁴
  • Borrowers with an FHA or VA home loan may be able to take advantage of a faster and simpler refinancing process with fewer requirements, which in some cases could include no need for a new appraisal, credit check, or income verification.

What are some other things to consider with refinancing?

• Even if you’ll be lowering your monthly payment by refinancing, remember that the closing costs incurred may outweigh that benefit.

• Refinancing your mortgage begins a new loan term. In many cases, this could mean a longer overall life of your home loan—and possibly more overall interest.

• Cash-out refinancing: Your new loan will have a higher balance than the original loan, which will very likely increase your monthly mortgage payments.

• Cash-in refinancing: This type of refinance is intended to pay down your principal balance, lowering your monthly mortgage payments and/or shortening the term of your mortgage. This is intended to save on interest over the life of the loan.

Every borrower’s homeownership journey is different. Get in touch with a loan expert to go over all your options—we’re here to help find the right solution for your individual needs!
 

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