Both purchase mortgages and refinancing mortgages are mortgage loans, but they serve very different purposes. A purchase mortgage is a type of loan that homebuyers request to finance the purchase of a new home. A refinance mortgage is the process homeowners go through to change the rate and terms of the mortgage. When you refinance your home, you get a new mortgage to pay off the old one.
While you're technically getting a new mortgage, refinancing doesn't work exactly the same way as taking out a loan for the purchase of a new home. Closing costs can be transferred to the new loan for most refinancing transactions, and there is no need to make a down payment to refinance. Because these “out-of-pocket” dollar amounts tend to be lower in a refinance, they can also make it easier to qualify. The loan application process may vary depending on your current loan program.
Refinancing and buying a mortgage without proper understanding can make it difficult for you to make the right decision. Learning about these two options will help you make an informed decision. Refinancing a mortgage allows you to change your current mortgage rates. A purchase mortgage, on the other hand, refers to the initial funds you use to finance a home you have purchased.
Refinancing a mortgage usually takes as long as buying a home, with an average of 30 to 45 days. Refinancing with a lower mortgage interest rate would allow you to have lower monthly payments and lower interest payments over the life of the new loan. Getting quotes from at least three mortgage lenders can help you maximize your savings when refinancing a mortgage. They can guide you to make better decisions by establishing the advantages and disadvantages of refinancing your mortgage. Mortgage refinancing can help you improve your financial situation by reducing the burden of high interest rates for many years to come.
Refinancing can be particularly beneficial when interest rates are low, reducing mortgage payments and saving thousands of dollars in interest over the life of the loan. Here's how refinancing a mortgage works, the most common options available, and the advantages and disadvantages you should have into account.