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Cash-Out Refinance loans allow cash back to the borrower after the costs of the new loan have been satisfied and the original loan has been paid off. These refi mortgages can be issued by conventional lenders and through government-backed loan programs like the FHA.

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Streamline Refinance Loans and Cash-Out Refinancing

September 11, 2020

Streamline Refinance Loans and Cash-Out Refinancing
What is the difference between a Streamline Refinance loan and cash-out refinancing? There are several differences, beginning with the availability of cash back to the borrower at closing time.

Cash-Out Refinancing Loans

As the name implies, cash-out refi loans allow cash back to the borrower after the costs of the new loan have been satisfied and the original loan has been paid off. These cash-out loans can be issued by conventional lenders and through government-backed loan programs like the FHA. Why should a borrower choose an FHA cash-out refinance?

Interest rates are generally lower on government-backed mortgages like FHA refinance loans; your FICO scores will affect the actual rate offered to you by a lender.

FHA cash-out loans can be used to refinance existing FHA mortgages or non-FHA loans. Cash-out refinance loans allow the borrower to apply for additional money for energy-saving improvements to the home via the FHA Energy Efficient Mortgage (EEM).

Some mortgage blogs mistakenly label these extra funds as cash back to the borrower (or don’t remind borrowers that this money is controlled), but the fact is that the funds you get through the EEM program may ONLY be used to pay for approved projects to improve the property. These funds cannot be used without restrictions.

Streamline Refinance Loans

Streamline refinance loans offered through government-backed mortgage loan programs allow those with existing VA or FHA mortgages to apply for refinancing with no FHA-required or VA-required credit check.

The purpose of these refinance loans is usually to provide a benefit to the borrower such as a lower mortgage payment or a lower interest rate. Unlike FHA cash-out refinance loans or their VA counterparts, borrowers cannot get cash back on the transaction except in the form of a refund for money paid up front for items later financed into the mortgage.


FHA Streamline Refinance loans allow EEM funds for approved energy-saving improvements, and like the Cash-Out refinance loan rules mentioned above, these funds cannot be used for any purpose except the approved upgrades to the property.

Streamline refinance loans cannot be used to refinance conventional loans. You must have an existing FHA mortgage in order to apply for an FHA Streamline Refinance, and the same goes for the VA version.

Which loan is right for you? It all depends on your financial needs and goals, but if you are after a lower rate or a lower monthly payment, it’s likely that a Streamline refinance is the best choice for you.

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