Friday, June 17, 2011

What Are Mortgage Home Loans and Equity Home Loans?

It is very challenging even for the financially literate people to evaluate the mortgages loans. At times it does harm you than good while the government tries to clarify the matter. You can even take a help of mortgage professional to delete the code by enlisting them. However it is necessary to know the basic from the beginning.

Mortgage home loans and mortgage equity loans both are secured loan and the difference is that they are fundamental. Which means that both are depended on a borrower’s home as collateral for making the loan.

To purchase a home, the loan that you take is known as mortgage loan. It could be the first mortgage, which also means that there are no other financing on the house, or it could be the second mortgage to get when the house is purchased, which means that there is an another mortgage being made at the same time. There is also the other option, where after purchasing the house if the homeowner wants then you can get the house refinance loan, all you have to do is you have to arrange for a new financer that would replace the present mortgage or mortgages. This option would make sense only when the interest rates have fallen and the refinance mortgage result is in lower monthly payment.

When we talk about equity home loan that means there is a first mortgage already in place, and the home owner wants to borrow some more money. The equity home loan can be used as collateral. However equity defines the market value of the house and the sum of remaining mortgage debt against the property.

You can also call the mortgage equity loan to be the second loan, which is secured by the home and are not in the first. Equity loans are different from other mortgage loan because they give you an option of taking out the cash from the property and spend the way you like.

There are two equity loan options for the borrowers. First, the borrowers have the flexibility to take out a home equity loan for a fixed amount that is distributed to the borrower when the loan closes. However the borrower has to make full payments on the amount, the other option is that you may establish a Home Equity of Credit, or HELOC.

With a HELOC, the homeowner establishes a line of credit, based on equity in the home, up to a maximum amount. The homeowner can then use that credit at any time and in any amount up to the maximum, often by simply writing a check. With a HELOC, the homeowner makes payments only on the amount that has actually been drawn against that line of credit.

To know more about Mortgage Home Loans you can go through this article: http://www.irs.gov/publications/p936/ar02.html and about Equity Home Loans please visit this link: http://www.federalreserve.gov/pubs/equity/equity_english.htm