Lenders use loan purpose to make decisions on the risk and what interest rate to offer.
[1] Pertaining to mortgages and their risk based pricing factors, the loan purpose factor is sub-categorized by purchase, rate and term refinance and cash-out refinance.
Cash received by the borrower at closing may not exceed $2000 to maintain rate and term status.
The purpose is, as the name implies, to reduce the interest rate, payment, and/or overall term of the mortgage.
Risk-based pricing typically mandates a .25% to .5% increase in interest rate if a borrower needs to draw equity out of the subject property.