What is the difference between a rate-and-term refinance and a cash-out refinance?

A rate-and-term refinance generally replaces your existing mortgage with a new loan primarily to change the interest rate, repayment term, or both. You typically do not take significant cash out of the home’s equity. A cash-out refinance also replaces your existing mortgage, but the new loan is larger than the balance being paid off, allowing you to receive part of the available equity as cash, subject to lender and loan-program requirements. Because the cash-out option increases the amount you owe against the property, it can have different costs and risks. The choice depends on whether your main goal is improving your mortgage terms or accessing home equity. You can learn more about cash-out refinancing and compare potential payments with a refinance calculator before deciding.