Cash-Out and Rate-and-Term Refinance
Understand two common refinance structures and how each may support a different financial objective.
A refinance replaces an existing mortgage with a new loan. A cash-out refinance may convert eligible equity into funds at closing, while a rate-and-term refinance generally changes loan terms without taking substantial cash out.
Cash-out refinance
Eligible homeowners and investors may consider cash-out refinancing for property improvements, portfolio needs, debt planning or other permitted purposes. Available equity is not the same as an approved cash amount; valuation, liens, costs and program rules matter.
Rate-and-term refinance
A rate-and-term refinance may be used to adjust the interest structure, loan term or payment profile. Whether refinancing is beneficial depends on the new terms, closing costs and how long the loan may be held.
What the review usually considers
- Current property value and existing liens
- Property use and borrower profile
- Income, assets or eligible alternative documentation
- Closing costs and the proposed new loan structure
Programs and requirements vary by lender, property and borrower profile. This information is educational and is not a commitment to lend.