Rate-and-Term Refi vs Cash-Out Refi
**Rate-and-term refinance** replaces your loan to lower the rate or change the term without taking equity out. **Cash-out refinance** increases the loan balance and puts cash in hand—higher payment and more interest over time.
Step by step
1. Set break-even months
Closing costs divided by monthly payment savings (rate-term).
2. Price the cash use
Compare cash-out APR to HELOC or personal loan for the same purpose.
3. Reset timeline
A new 30-year starts the amortization clock again.
Rate-term vs cash-out
Rate-term optimizes cost; cash-out optimizes liquidity at a price.
- Rate-and-term: Lower rate or shorter term; minimal cash at close.
- Cash-out: Equity to cash; higher balance; stricter LTV caps.
Use our calculators
Common mistakes
- Extending term while chasing rate
- Using cash-out for depreciating assets
FAQ
Is cash-out interest deductible?
Only if funds used to buy or substantially improve the home—confirm with a tax pro.