That article is about Mortgage Rates vs. Refinance Rates. While most people lump their home loan costs into the general word “mortgage”, since to them any loan using one’s house as collateral is a mortgage, technically, there is a difference between home mortgage rates and home mortgage refinance rates. Mortgages are the initial mortgages when you purchase the house or property.
You request a mortgage for the express purpose of buying a specific house. Refinances, on the other hand, require that you already have a mortgage in place, and that you want to write a new mortgage to change variables of the first. Refinance can also include cash-out which you do not normally receive when you initially buy a home, since you are making a down payment on the house to buy it. In other words, a lender is not going to request a particular percentage deposit, then give you money back when the deal is closed.
As time passes, and you decide to refinance your mortgage loan, undoubtedly your financial situation has changed either positively or negatively. For example, you may be earning more money or you may be in a position where you need cash instantly since you have been out of work. To the lender, those changes are going to factor in when determining a refinance rate.
If you have built up equity and improved your credit score, then your refinance rate may be better than the original mortgage rate. This also assumes general interest rates are lower or equal. Likewise, if you have recently made late payments on other debt, and had any late payments on the existing mortgage, your refinance rates are going to be higher. The lender is willing to refinance you, but there is a cost because your situation is riskier than when you signed your initial mortgage.
Equity may also play a role in how lenders determine rates. When making a large down payment for the initial mortgage, the mortgage rate may have been favorable because you had committed a good portion of your money to the purchase. But when you decide to refinance, you may now be in a position where you have refinanced before, and thus, your equity is diminished leaving you with a mortgage close to the value of home. In this case, it is possible that refinance rates are going to be higher when all the costs are factored into the equation.
Finally, when comparing mortgage rates versus refinance rates, the advertised rates may seem the same, but the details of the actual mortgage or refinance are generally quite different.