Rate & Term vs Cash-Out Refinance
The two main refinance types work very differently. Knowing which one you are doing affects tenure, cost and the rules that apply.
Quick answer
A rate & term refinance replaces your existing home loan with a new one for the same outstanding balance — usually to get a lower rate or different tenure, with no extra cash taken out. A cash-out refinance takes a new loan larger than your current balance and gives you the difference in cash. Cash-out increases your debt and can fall under different rules, so banks treat the two differently.
Key takeaways
- Rate & term: same balance, new package — no cash taken out.
- Cash-out: new loan is bigger than your balance; you receive the difference.
- Cash-out increases your total debt and is secured by your home.
- The type you choose can change tenure limits and which rules apply.
Rate & term refinance
You refinance only your remaining balance to a new package, usually for a lower rate or a tenure that suits you better. You do not receive any cash. This is the simpler, lower-risk type.
Cash-out refinance
Your home is now worth more than you owe, so you refinance to a larger loan and take the extra as cash. It can fund renovation or other needs, but it raises your debt and your home backs the bigger loan.
Checklist
- Decide whether you actually need cash, or just a better rate.
- For cash-out, confirm how the bank treats the extra amount.
- Compare total cost, not just the monthly figure.
Watch out for
- Taking cash out increases your debt and the risk against your home.
- Do not assume cash-out keeps the same tenure as a normal home loan.
Frequently asked questions
Is rate & term refinance the same as cash-out?
No. Rate & term keeps the same balance with a new package and no cash taken out. Cash-out gives you a larger loan and pays you the difference, which increases your debt.
Which refinance type is lower risk?
Generally rate & term, because you are not increasing your debt. Cash-out adds to what you owe, so it needs more care.
Related guides
What Is Refinancing a Home Loan?
Refinancing means replacing your current home loan with a new one. Here is why people do it and what to weigh up.
Read guideCash-Out and Debt Consolidation Refinance
Two popular reasons to refinance: taking cash out of your home's value, and combining debts into one loan. Plus the risks.
Read guideCash-Out Refinance and the 10-Year Tenure Rule
A cash-out portion may be reclassified as personal financing and capped at a shorter tenure. Here is what that means for your monthly payment.
Read guideImportant
This content is for general education only. It is not legal, financial, banking, valuation, tax, investment, or property advice. Always verify with the relevant bank, lawyer, valuer, agent, developer, auctioneer, land office, LPPSA, LHDN, or authority before making decisions.
Last reviewed: 2026 edition · Rules, rates and fees change over time. Always confirm the latest figures with the relevant authority before you act.