A rate-and-term refinance replaces your mortgage to change the rate or term, without taking extra cash. A cash-out refinance borrows more than you owe and gives you the difference. Rate-and-term loans allow higher loan-to-value ratios and get better pricing; cash-out loans are usually capped around 80% of the home’s value (90% for VA) and cost a bit more.
Side by side
| Rate-and-term | Cash-out | |
|---|---|---|
| Purpose | Lower rate, change term, remove FHA insurance, switch from an ARM | Get cash from your equity |
| Typical maximum loan-to-value | Up to about 95% to 97% conventional | About 80% conventional and FHA; up to 90% VA |
| Pricing | Standard | Higher rate or fees |
| Waiting period | Usually none beyond lender rules | Often 6 to 12 months after purchase, depending on the program |
Small amounts of cash
A rate-and-term refinance can usually include your closing costs and a small amount of cash back, often limited to the lesser of $2,000 or 2% of the loan for conventional loans. More than that makes it a cash-out.
Try it: Refinance break-evenSee how long a rate-and-term refinance takes to pay for itself.For cash-out, see the cash-out refinance calculator, and compare with a HELOC in cash-out refinance vs. HELOC.
Streamline options
FHA and VA borrowers can often refinance with less paperwork; see FHA Streamline and VA IRRRL.
Before you refinance
Check your home’s value with the home value estimator to estimate your loan-to-value; see loan-to-value, explained. Then compare offers with compare mortgage offers.
Common questions
How much equity do I need for a cash-out refinance?
Usually at least 20% left after the refinance, since most programs cap cash-out around 80% of value (90% for VA).
Can I get any cash back with a rate-and-term refinance?
Usually only a small amount, often the lesser of $2,000 or 2% of the loan for conventional loans.
Do cash-out refinances have higher rates?
Usually slightly higher rates or fees than rate-and-term refinances.
Updated October 2026. Educational content. OfferBacked is not currently a lender and doesn’t issue pre-approvals or loans.