Mortgage Questions And AnswersMortgage questions are always frequent when someone first begins shopping for a home loan. We've listed many common mortgage questions in one single list. What’s the definition of a mortgage? A mortgage, or home loan, is a legal contract between a borrower and a lender that involves using property as collateral to secure the loan. If the borrower does not fulfill the payment requirements, the lender has the right to take possession of the property. What’s a home equity loan? Home equity loans are a type of loan that allows a homeowner to receive a cash loan based off the current value of their property less the mortgage amount still remaining to be paid. These loans are frequently used for things like debt consolidation, education expenses, or home improvements. How is a home equity loan different than a home equity line of credit? A home equity line of credit, also known as a HELOC, is an open line of credit where only the outstanding balance accrues interest. Because it provides access to credit on an as needed basis, many homeowners find it much more flexible and a better value than a home equity loan. What’s a second mortgage? It’s a type of mortgage refinancing that allows borrowers to secure a second loan on their property in addition to the first loan. What is the definition of a reverse mortgage? Reverse mortgages are a type of loan that allow homeowners who meet an age requirement to transfer home equity into cash. Recently becoming more and more popular, reverse mortgages are not required to be repaid until the borrower no longer lives at the residence. Why are some rates fixed and others adjustable? It depends on the lender and the type of loan you’re applying for. A fixed rate mortgage means both the interest and the payment will remain steady for the entirety of the loan term. An adjustable rate mortgage means your payment can fluctuate based on the current market. What’s an interest-only mortgage? Interest only mortgages require the borrower to pay only the interest on the principle in monthly installments for a fixed period of time. What’s an amortized mortgage? Amortized mortgages are loans paid in installments that are comprised of both principle and interest, and which is paid off--or amortized--over a fixed period of time. What’s the difference between mortgage brokers and mortgage bankers? A mortgage broker serves as a middleman who helps to match borrowers with lenders based on individual needs and circumstances. Mortgage brokers manage 80% of all transactions between borrowers and lenders, but mortgage bankers are the ones who actually finance and release the largest portion of home loans. |
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