No Cash-Out Refinance

AAA

DEFINITION of 'No Cash-Out Refinance'

The refinancing of an existing mortgage for an amount equal to or less than the existing outstanding loan balance plus an additional loan settlement cost. It is done primarily to lower the interest rate charge on the loan and/or to change the term of the mortgage.

A no cash-out refinance is also known as a 'rate and term refinance'.

INVESTOPEDIA EXPLAINS 'No Cash-Out Refinance'

Most borrowers do not realize that refinancing an existing mortgage into a new mortgage with a lower interest rate might actually mean more interest will be paid over the life of the mortgage. This is especially true if the new mortgage has a term longer than what is left on the existing mortgage, but it is dependent upon the amount by which the interest rate is lowered, and any additional outstanding years on the new loan over the old loan.

Also, most refinancing transactions involve additional direct costs, which most borrowers roll into the balance of the new mortgage, making you pay even more. The bottom line is that there is more to be considered in refinancing a mortgage than simply lowering your monthly payment by a few dollars.

RELATED TERMS
  1. Refi Bubble

    A period during which old debt obligations are being replaced ...
  2. Refinance

    1. When a business or person revises a payment schedule for repaying ...
  3. Refinance Wave

    A situation where a large amount of mortgage refinancing occurs ...
  4. Cash-Out Refinance

    A mortgage refinancing transaction in which the new mortgage ...
  5. Mortgage Originator

    An institution or individual that works with a borrower to complete ...
  6. Rate And Term Refinance

    The refinancing of an existing mortgage for the purpose of changing ...
Related Articles
  1. How Mortgage Refinancing Affects Your ...
    Credit & Loans

    How Mortgage Refinancing Affects Your ...

  2. Make A Risk-Based Mortgage Decision
    Options & Futures

    Make A Risk-Based Mortgage Decision

  3. When (And When Not) To Refinance Your ...
    Home & Auto

    When (And When Not) To Refinance Your ...

  4. How Does A Reverse Mortgage Work?
    Retirement

    How Does A Reverse Mortgage Work?

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center