Purchase Mortgage Vs. Refinancing: The Difference
Colorado is a popular destination among homebuyers for several reasons: outdoor lifestyle, cost of living, and part of the steadily-growing economy. Each year thousands of dreamy-eyed residents relocate to this state to live a fulfilling life.
And if you need stats, here it is: a media report suggests that the U.S. state has a homeownership rate of 65%.
Homeownership is a big accomplishment! It requires a significant portion of an individual’s earnings and savings. Due to the investment size, selecting the right mortgage loan is crucial—as any mistakes in the decision-making process can inflict a larger financial loss. To prevent any mishap, it is recommended to understand available mortgage loan options before applying for a home loan or jumping straight into purchasing or refinancing.
At Tayton Capital, we specialize in home purchase loans and refinances. As a leading full-service mortgage company, we equip homebuyers with the required resources to help them make informed decisions.
With the same goal in mind, we have brought this blog to entail the difference between the most-confused types of loans: purchase mortgages and refinance mortgages. If you're considering a loan for a property purchase in Aurora Co, read this blog to understand the difference between a purchase and refinance mortgage.
Simply put, the difference lies in the purpose of these two types of loans.
- A purchase loan is the one you obtain to purchase a home with borrowed money from a mortgage lender.
- A refinance loan is the one you obtain on a pre-owned home with a mortgage. The aim is to refinance the existing loan into another one to save interest, lower monthly payment, or pull cash out of equity.
What is a purchase mortgage?
Homebuyers use this loan to finance a new home. Several programs are available in this mortgage type, and the selection mainly relies on the buyer's financial state and concerned property. Therefore, it is safe to consider that mortgages shouldn't be considered one-size-fits-all.
We offer comprehensive assistance to our customers in finding the best-suited loan that aligns with their financial goals. Our purchase loan programs includes FHA, VA, Jumbo, Conventional, USDA, and Non QM Investor products.
When to purchase?
Out of loads of reasons, the main reason to apply for a purchase loan is that it is critical to buy a home (in case you need financial assistance) or build up your equity. It is important to remember that you can obtain a purchase loan by going through the application process.
What is a refinance mortgage?
It is the best way to:
- Alter the current mortgage rate and terms.
- Go down on their interest rate and monthly payments.
- Cash out a portion of your property's accumulated equity.
Let's discuss the two main types of refinances briefly below:
Rate or Term Refinance: It is refinancing an existing mortgage to cut down the interest rate or rearrange the loan duration without increasing the loan amount.
Cash Out Refinance: It is refinancing the running mortgage into a larger one that changes the interest rate and the loan terms, allowing the borrower to retrieve some amount from their equity. It is generally preferred for home improvements or debt consolidation.
Our refinancing program includes FHA Streamline, FHA Cash Out, VA Cash Out, Conventional, and Jumbo.
When to refinance?
Refinance loans are used for several reasons, but the most popular reason is to get a better interest rate. Refinancing allows you to gain a lower mortgage interest rate that leads to lower monthly payments and a reduced number of interest payments over the life of the revised loan. Additionally, it allows you to adjust the terms of your original purchase loan.
Another instance where refinancing is a good option is when you wish to eliminate PMI.
What to do next?
Choosing a loan for a property purchase in Aurora, CO, or anywhere else can be daunting. Therefore, it is essential to consult a field expert to gain more insight into the process. The first step is to find and pick the right lender. If you are unsure about the loan you should pick for your situation, Contact us to get professional guidance.
* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.