Refinance Mortgage Rates

Refinances Vs Mortgages

August 10, 2007 on 11:10 am | In Refinancing, Mortgages |

There are a number of different home loans available in the world today and indeed even the term home loan itself to some degree is a larger term that doesn’t really cover everything involved. Home loan is a category of loan that a person can choose from and within that category there are a number of different transactions. One of those transactions is known as the mortgage and as far as home loans go a mortgage is the most popular kind of home loan in the history of financial transactions. In addition to the mortgage, there is also the refinance. Refinances are quite a bit less frequent than mortgages, but at the same time they are loans that people have used in the past for different things. This article discusses some of the differences between refinances and mortgages in an attempt to compare the two.

Definition

Mortgages and refinances, despite being similar, are indeed not the same thing. They have different definitions that serve to differentiate the two. When you look at refinances, what you see is that they can only exist with an existing mortgage, whereas mortgage agreements do not depend on anything else for existence. A mortgage agreement is an agreement whereby you are given the chance to own property where the overwhelming majority (usually 95%) of the property is paid for by a financial institution with the agreement that you will then put that property up for collateral on the loan that they just gave you. A refinance is a re-negotiation of another home loan agreement partway through that agreement.

Application

The application process between refinances and mortgages is quite similar, but there are a couple of differences that are worth highlighting. When you first take a look at the refinances and mortgages applications, what you immediately see is that a mortgage application does everything from a first time or new deal basis whereas the refinance applications do a lot when it comes right down to the revision deal basis. In other words, with refinances, the application process consists of a lot of going over a previous application whereas with mortgages you just have a fresh go at things.

Amount

The amount that you can get in terms of the loan itself is quite different from refinances and mortgages. This is because the refinances by their very definition are loans intended to help a person re-work an existing agreement. Ultimately, this means that the amount of the loan is always going to be some fraction of the mortgage loan amount. Therefore, mortgage loan amounts are always going to be higher than refinance amounts, all other factors being equal.

Dominant Factor

The dominant factor when it comes down to mortgages is always going to be the credit rating of the person applying for the actual mortgage. The dominant factor by and large when it comes down to refinances is also a credit rating factor, but at the same time if you have a lower credit rating and excellent performance during the first part of your mortgage, then the credit rating might not be as dominant a factor as otherwise.