Generally speaking, a rate and term refinance poses less risk to the lender so may be easier to qualify for than a cash out refinance.

Lenders sometimes give borrowers lower rates when they only do rate and term refinance. Cash-out refinances are considered riskier loans so some lenders add onto the base rate to compensate for this risk.

Sometimes it is possible to do a rate and term refinance on your first mortgage and then a cash out loan on the second mortgage. These can be done at the same time. Doing a rate and term refinance on the first will get you a lower rate.

Rate and term refinances can also include paying property taxes that are due without being classified as a cash out transaction.

Usually people do a rate and term refinance because they want to lower their monthly mortgage payments. Having a lower interest rate, and spreading your payments out over a longer period of time, equates to paying less each month.

Most lenders will allow a maximum of $2,000 to the borrower when doing a rate and term refinance. Anything over that $2,000 number, and it is considered a cash-out refinance.

A rate and term refinance would not include a debt consolidation refinance or a cash out refinance.