Purchase vs. Refinance Mortgages: What’s the Difference?

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In the jargon-heavy housing world, there are two types of mortgages you may hear loan officers and real estate agents talk about most often: purchase and refinance.

While they’re both technically home loans, purchase and refinance mortgages accomplish two different things for current and future homeowners. Depending on your needs and where you are in your home-owning journey, one might be a better fit for you now, while you may consider the other option years down the line.

Purchase vs. Refinance

A purchase mortgage (or purchase loan) is money you borrow from a lender to finance buying a new home.

By contrast, a refinance mortgage (also called a refinance or refi) is a second loan type you take out on your existing home to potentially lower your interest rate, change your mortgage term, or borrow against your equity for home improvements or debt consolidation.

Purchase = New Home

Generally, when people talk about mortgages, they’re referring to purchase loans.

When you take out a mortgage, you agree to repay the money to your lender over a set period of time (also known as your mortgage term). Your monthly payment is determined depending on your down payment and other contributing factors, such as interest rate, escrow payments, and Private Mortgage Insurance.

Refinance = Existing Home

You can get a purchase loan without a refinance, but you can’t refinance without a purchase loan. A refinance is necessary if you have an existing mortgage you want to modify. With a refinance, you might be able to change your loan term to pay off your mortgage faster, or lower your interest rate to possibly save money.

With a cash-out refinance, you might change your term or rate, but you’ll also get the difference between your old mortgage and your new one.

Cash-out refinancing lets you borrow against the equity you’ve built into your home. And, the money you get is flexible—you could use it for home repairs or a renovation, paying your child’s college tuition, or paying off debt like medical bills or credit cards.

With a refinance, you don’t have to use the same lender that helped you get your original mortgage. However, many lenders require you have at least 20% equity in your home. Refinance loans also come with new interest rates, so you should study those closely to gauge the right time for you to refinance.

Good news? You don’t have to navigate any of this alone. Reach out to a Wyndham Capital loan officer today for help deciding which loan is best for you.


With more than 21 years in the industry, we’re a leading fintech mortgage lender saving current and potential homeowners money and time through transparent rates, zero junk lender fees*, and technology that automates over five million tasks each month. We’ve served over 100,000 borrowers, boast a 98% customer satisfaction rating and 4.9 stars on thousands of online reviews, and provide a “mortgages without migraines” experience. (*Note: Wyndham does not charge junk fees, application fees, processing fees, or underwriting fees. There can be fees charged directly by Third Parties for services such as, but not limited to, title, settlement, appraisal, taxes, and insurance.)

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