A no cash out refinance is a type of mortgage refinancing in which the new loan is made for less than the original loan amount for the main purpose of lowering payments through lowering interest. If a mortgage is taken out at a set interest rate and the equity is built up over time, it is potentially possible that by refinancing the mortgage debt that the new repayment terms would be more attractive.
In a legal sense, the option of pursuing a no cash out refinance can be done to lessen debt burden by showing that equity is built up and for the potential of having a greater position if liquidation or bankruptcy is a future possibility that is trying to be avoided. This is a way of legally repairing a credit rating in order to potentially take out another loan.