--------------------------------------------------------------- Summary
For
many of us the "American Dream"
still involves owning property and land. We
all are very aware that the last few years
has seen a dramatic rise in property values
and thus we see the blossoming of many lenders/mortgage
companies. There are some very big players
out there in the mortgage arena, but also
countless smaller to medium sized alternatives
as well. There are many types of mortgage
loans available to the public. There are loans
for those looking to buy a new home, fix their
current property, refinance a mortgage loan,
open a home equity line of credit or so on.
Take a look
at this section to better understand the terminology
involved in mortgages, as well as some key
issues/challenges that are out there.
Brief
Descriptions on Types of Mortgage Loans
1) Home Loan.
This is the most frequent mortgage loan and
involves an individual taking out a loan to
purchase a desired property. This can often
be referred to as a "first mortgage."
Most mortgage lenders prefer the first mortgage
not to exceed 80% of the property value of
the house.
2) Second
Mortgage. There can actually be two different
types of second mortgages. Some buyers can
afford a down payment on a property
and thus will borrow the difference as a second
mortgage that is connected to the first mortgage.
This is known in the mortgage industry as
a "tandem loan"
and to the borrower comes across as one loan
with one set of payments, but in actuality
may have two different interest rate levels.
The other type of second
mortgage involves someone who has owner their
home for a while, and decides to take a second
mortgage (or second lien) on the house. This
could be for a variety of reasons, including
sending kids to college, significant home
repairs, and so on. This is referred to as
a "second lien," since in the case
of bankruptcy the first mortgage must first
be paid off, before this mortgage is paid
(this one is in second place in line).
3)
Refinances. For individuals who already
have a mortgage loan, this option may allow
them to take advantage of better interest
rates, extend the life of the loan (and thus
bring payments down) or avoid a balloon
payment.
4)
Home Equity Line
of Credit (HELOC). This is a revolving
loan that is taken out against the equity
you own in a property. Often HELOCs are used
for investments to repair the existing property
(depending on the location, there may be some
government tax credits for this use), purchasing
a car, financing a trip, etc. HELOCs work
much in the same way as a credit card, but
unlike a credit card this is a secured
loan. Often lenders will even give borrowers
charge cards they can use against the HELOC.
There are many forms
of home loans (or mortgages) and companies offering
them
Take a look at this
section to understand about the different types
of loans and associated issues with owning a home
(refinancing, foreclosures, equity, etc)
