What is a mortgage broker
And what do they do?
If you're looking to finance a home purchase or tap into the equity you've built up in your home, you may be wondering what the difference is between a mortgage and a home equity loan. Both types of loans can be used for either purpose, but there are some key differences to take into account.
A mortgage is typically the largest loan that most people will ever take out, and as such, it has the longest repayment term and highest interest rate. Home equity loans, on the other hand, tend to have shorter terms and lower interest rates.
Mortgages are also generally more complex than home equity loans, with a variety of different options available. You'll need to carefully consider all of your choices before selecting a mortgage.
A home equity loan is a second mortgage on your home. The loan is secured by the equity you've built up in your home, and as such, it usually has a lower interest rate than a mortgage.
You can use a home equity loan for any purpose, including home improvements, consolidating debt, or paying for major expenses. However, since the loan is secured by your home's equity, if you default on the loan, you could lose your home.
How a mortgage works -
A mortgage is a loan that is used to purchase a property. The loan is secured by the property itself, which means that if you default on the mortgage, the lender can take possession of the property.
Mortgages typically have longer terms than home equity loans, which means that they have lower monthly payments but higher total interest costs over the life of the loan.
Mortgages also tend to be more complex than home equity loans, with a variety of different options available. You'll need to carefully consider all of your choices before selecting a mortgage.
The mortgage process -
The mortgage process typically involves four steps:
1. Pre-qualification: You'll meet with a mortgage lender to discuss your finances and the amount of mortgage you can afford.
2. Mortgage application: You'll complete a mortgage application and provide the lender with financial documentation, such as pay stubs and tax returns.
3. Loan approval: If your mortgage application is approved, you'll receive a loan commitment from the lender, which will outline the terms of the loan.
4. Closing: Once you've found a property to purchase, you'll work with a real estate attorney to finalize the sale and close on the mortgage.
Home equity loans -
A home equity loan is a second mortgage on your home. The loan is secured by the equity you've built up in your home, and as such, it usually has a lower interest rate than a mortgage.
You can use a home equity loan for any purpose, including home improvements, consolidating debt, or paying for major expenses. However, since the loan is secured by your home's equity, if you default on the loan, you could lose your home.
The process of taking out a home equity loan -
The process of taking out a home equity loan typically involves four steps:
1. Pre-qualification: You'll meet with a mortgage broker to discuss your finances and the amount of mortgage you can afford.
2. Mortgage application: You'll complete a mortgage application and provide the lender with financial documentation, such as pay stubs and tax returns.
3. Loan approval: If your mortgage application is approved, you'll receive a loan commitment from the lender, which will outline the terms of the loan.
4. Closing: Once you've found a property to purchase, you'll work with a real estate attorney to finalize the sale and close on the mortgage.
Mortgages and home equity loans are both loans that are secured by your home. However, they have some key differences:
- Mortgages have longer terms and higher interest rates than home equity loans.
- Home equity loans can be used for any purpose, while mortgages must be used to purchase a property.
- If you default on a mortgage, the lender can foreclose on your home. If you default on a home equity loan, the lender can place a lien on your home.