Direct answer
How this refinance option works
A rate-and-term commercial refinance is primarily used to repay the current mortgage and eligible transaction costs. It may change the interest structure, amortization, term or lender, but it is not designed mainly to distribute property equity.
This route can be useful when the current loan is maturing, floating-rate exposure no longer fits the ownership plan or the property now qualifies for a different lender category.
The analysis should compare total closing costs and prepayment obligations with the proposed payment, term, recourse, reserves and future flexibility. A lower headline rate alone does not prove the refinance is better.
If requested proceeds materially exceed payoff and costs, the transaction is generally evaluated as cash-out and may face different leverage, seasoning and documentation requirements.