Why Are Mortgage Refinance Rates in Horry County Higher Than Home Purchase Rates?

When the mortgage refinance rates began to fall in 2020, many people refinanced their mortgages. They were excited to snag a 3.25% APR.

If you’ve lately compared mortgage refinance rates Horry County, SC in an effort to save money on the home loan, you might have noticed that they are higher than the rates of loan purchase.

It is the case for many large banks, even when, while the large institutions are not necessarily leaders of the big mortgage business anymore.

Understanding Mortgage Financing and House Purchase Loans

So why some big guys in the list have refinance rates and purchase rates with different points, APRs and pricing points?

For many beginners, there is a considerable difference between mortgage refinance and house loan, though both can process similarly and the underlying loans are also not very different.

Eventually, a house buying loan is for people who are yet to buy a property, whereas financing a mortgage is ideal for house owners who wish to redo their house loans.

Both have different objectives, but when the underlying loans are 30-year fixed mortgages with the same amounts of loans, the same borrower credit scores, and the same types of properties, why the rates are different? The answer is simple! Low default chances

House Buying Mortgage Have Least Chances of Defaults

There are main mortgages, like house purchase loans, term refinances, and rates for cash out. The first one is self-explanatory and has already been explained above, the second is redoing the current mortgage after you get a fresh loan term and interest rate, without making changes in the amount of the loan.

The final type has larger loan amounts at closing as you pull the equity from the house, which a layman can assume to bear high risk.

After all, in case a borrower owes a high debt, maybe with a higher payment for the monthly mortgage Horry County, SC, as an outcome, their risk of defaulting also rises.

To simply put it, when you pull out cash from your house, you also increase the outstanding loan balance, increase the ratio of loan to value and lessen your available equity for the home, increasing the risk.

In theory, this can result in mortgage refinance rates in Horry County for compensating high risk. Refinance rates are high, with everything being equal, for all lenders and banks.

The lowest Mortgage Rates are for House Purchase Loans

Here the reason is data. The important loan characteristics like LTV, DTI, and FICO score, indicate the lowest rates of default on term refinances and rates, it is house purchase loans that are the most performing ones. A possible reason is the faulty refinance appraisals that overvalue properties.

Irrespective of it, buying mortgages has the highest defaults after term refinances and rate and at last, cash-out refinances the last which makes sense.

Interestingly the characteristics of loans also point out that purchase mortgages and cash-out refinance can default with the same rate, yet they’re priced apart. Mortgage interest rates today Horry County, SC

End Note

Be careful about the assumptions that lenders provide while listing their mortgage rates. It can also be that you’re not comparing apples to apples, if there are other loan amounts, credit scores, LTVs, mortgage points, etc. However, know that mortgage refinances rates in Horry County are high as they default more than the purchase loans and it needs a high price for compensating for the high risk, as it is simple and plain.

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