Purchase vs. Refinance
A purchase loan is the loan that you obtain when borrowing money from a mortgage lender in order to purchase a home.
A refinance loan is the loan you obtain when you already own a home with a mortgage and would like to refinance that existing loan into another loan.
Reasons to Refinance
You can choose to refinance for a variety of reasons, but the most common reason is to get a better interest rate. Refinancing for a lower interest rate would allow you to have lower monthly payments and fewer interest payments over the life of the new loan.
You may also refinance a loan to “cash-out”, or take equity from the property to use at your or to make home improvements. Other reasons to refinance may include a divorce or the elimination of private mortgage insurance (PMI) due to price appreciation of the property.