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An Introduction to Home Loans


There are a number of different home loans that people think about when the subject of home loans comes up. There are so many different home loans in the world today to choose from that people sometimes have difficulty distinguishing between the different home loans that are available. It is a difficult thing to decide which home loan is right for you and the first step towards doing that is in making sure that you understand the different home loans that are available.

There are literally dozens of different home loans available for different people if you are looking specifically at different terms that are different but for the sake of clarity there are really only two larger categories of secured home loans (home equity loans and mortgages) and two types of each loan (variable and fixed) that you need to worry about to start.

Home Equity Loans

Home equity loans are the youngest kind of home loans in terms of popularization and indeed when you look at the terms of most home equity loans it is sometimes hard to figure out exactly why home equity loans have not been popularized much sooner. In any case, a home equity loan is simply you taking a look at the available equity in your house (equity is defined as the value of the house less any loan amounts currently tied to it in the form of mortgages or other home loans) and taking out additional loan money in a lump sum with your house put up as collateral. It is useful for a number of different reasons and that is what ultimately draws a number of people to it.


Mortgages are perhaps the most well known home loan on the market right now and this is partially because mortgages by their very nature are usually going to be the first home loan that a person comes across. A home equity loan can't be used unless you already own the home, so a mortgage by definition will be needed before a home equity loan can be invoked. The basic terms of a mortgage are simply that the people that are interested in getting the mortgage sign an agreement with a financial institution that sees the financial institution provide the people with a gigantic chunk of the money they need to buy the house provided that the person then puts that house up as collateral on the loan and pays the bank back with interest over time.

Variable vs. Fixed

Variable and fixed are both referring to the interest rates attached to the loan that you are interested in. When you consider the concept of a fixed rate home loan, the basic premise there is that the interest rate that you sign up for is fixed from the date that you enter the agreement to the date that you make your final payment. Under a variable rate loan, the rate fluctuates up and down specifically based on the market conditions. They both have their advantages and disadvantages.

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