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Traditional A traditional refinance ensures that no additional mortgage debt is added.  It is a little more expensive "out-of-pocket" than other refinancing options because closing costs and prepaid expenses are paid for from the borrower's savings - not the mortgage proceeds. No-Cost The terms No-cost refinance and Zero-cost refinance are often cited incorrectly. Although both refer to a refinance that requires nothing "out-of-pocket", they are different in structure.  The goal in a no-cost refinance is lowest possible rate/payment with closing costs and prepaid expenses paid through loan proceeds.  Zero-Cost Unlike the No-cost refinance, the Zero-cost approach does not require increasing the loan amount to pay loan fees.  Instead, a higher interest rate is chosen.  The higher rate produces a market-price differential (commonly referred to as a "yield spread premium") the lender then uses to pay most or ALL the refinance costs. Rate-Term Refi A rate-term refinance by definition includes the pay-off of a primary mortgage and purchase-money subordinate financing.  In many cases closing costs and prepaid expenses can be included.  This type of refinance can be accomplished using the methods described above but allow little or no cash back to the borrower. Cash-Out Refi A cash-out refinance is used to pay-off of a primary mortgage, unseasoned subordinate financing, and other debts.  Debt consolidation is often the goal.  A cash-out refinance will typically require a slightly higher rate or slightly higher closing costs when compared to the rate-term option. Net Tangible Benefit ALL refinanced mortgages must benefit the borrower. Several "churning" schemes emerged during the housing boom. Churning is "equity stripping".  To discourage this predatory behavior, lenders and borrowers must define what benefit will be received from the refinance.  A Loan Originator earning a commission is not an acceptable benefit. Page: 1 - 2 - 3  Next