Mortgage

Technically, the term mortgage does not refer to the actual home loan or to any kind of debt.

A mortgage is the transfer of an interest in property to a lender to securitize a loan, it is the lender's security for a debt; a debt which was normally incurred to purchase the property in the first place.

Once the obligation of that debt has been fulfilled by the borrower, the lien held by the lender on the property is released. If a debtor is found to be in default on a home loan that was secured by the property, then the creditor can pursue foreclosure proceedings and regain possession of the property. Banks and lenders who engaged in predatory lending over the course of the past decade often left many unaware and desperate homeowners in a situation where they owed more than what there home was actually worth and payments were more than they could actually afford to pay.

This type of lending led to not only the downfall of many financial companies like Countrywide Home Loans, but also to widespread economic turmoil in the United States in what prompted the US subprime mortgage crisis. A large number of families and consumers found themselves facing not only foreclosure but also bankruptcy. The US government, under the administration of Barack Obama intervened to help people learn to better manage their credit, protect families from foreclosure, and negotiate other forms of settlement and payment plans with lenders on behalf of consumers.http://www.credit.com/news/credit-debt/2010-07-14/fannie-mae-mortgage-help-center-reaches-out-to-distressed-homeowners.html

Even though technically, a mortgage is just the instrument by which the home loan is guaranteed for repayment to the lender, in the common lexicon, mortgage and home loan are often used interchangeably.

30-year fixed rate

Often the easiest to qualify for and also the one with the maximum tax advantage in terms of having the greatest interest deduction.

15-year fixed rate

The shorter term usually results in a lower interest rate. You will pay off this mortgage sooner, but your monthly payments will be larger compared to the 30-year mortgage.

Adjustable Rate Mortgage

The adjustable rate mortgage is structured to have a fixed initial interest rate, most often lower than the comparable fixed rate mortgage, for a predetermined period of time. Beware, as when the initial fixed-rate period expires, the interest rate will be readjusted based on market conditions of the time, often resulting in a higher interest rate.

This is a good option for people planning to stay in their home for a short period of time, less than the period of time during which the fixed rate would be in place.

Equity Mortgage Loans

Equity loans are second in lien position to the existing first mortgage. Borrowers take out equity loans to receive cash from the equity that they have built up in the property, often bolstered by appreciated property values.

A lender may foreclose on a property, if the borrower has demonstrated himself to be in non-payment. The foreclosed property may then be sold, and any amount received from the sale applied to the original debt.

The content in this page is not a substitute for professional financial advice. Please contact a finance professional before using the information presented here.