Differences Between Refinances and Mortgages
There are a number of things that set refinances and mortgages apart. While they are both technically a part of the larger scope of things known as home loans, at the same time the differences between refinances and mortgages are plain for all to see when it comes right down to it. The differences inherent to refinances and mortgages are not born so much out of the actual large difference between the two deals, but more so in the details of the two deals. This article discusses some of the more important differences that you will have to know if you ever plan to use either of them in your home finance plan.
1) The first major difference between refinances and mortgages is simply that it is possible to have a mortgage without anything else, but you can not have a refinance without first having a mortgage. In other words, a mortgage agreement can be done completely autonomously and without relation to anything else but if you do not have some sort of home loan agreement already in place, then quite obviously you would have nothing to refinance.
2) In addition to that, when you look at the actual idea behind the mortgages and then compare that to the actual idea behind the refinances, you can see that refinances are one of the two extremes in comparison to mortgages when it comes to flexibility. When you go and sign up for a mortgage, everything from the interest rates to the fees involved to the monthly payments to the length of the mortgage itself is all reasonably set for you when you begin. A refinance changes all of those rules and it can either have a net negative effect on flexibility or a net positive effect on flexibility depending on your credit rating and your history with paying off the mortgage.
3) Refinances, by their very nature, allow you to plan around the rest of your life. When you do a refinance, what you are essentially trying to accomplish is to change your mortgage or other home loan agreement to make your life easier; this is true regardless of what reason specifically you have to go after a refinance. A mortgage on the other hand is something that you would have to plan your life around. Have you ever noticed that when a person is planning out a mortgage, they are looking at things along the lines of how much money they need to save up each month and other similar things, whereas when they are planning out a refinance, it is the exact opposite? That is certainly a difference worth noting.
These are just three of the major differences between refinances and mortgages. Looking over these three differences, what is immediately apparent is that the differences are in the details rather than in the overall image. This is what was alluded to in the introductory paragraph and ultimately what was illustrated through the three examples provided.