FIRST MORTGAGE:
| | A mortgage is a method of using property as security for the payment of a debt. Technically the term mortgage ("dead pledge") refers to the legal device used in securing the property, but it is also commonly used to refer to the debt secured by the mortgage. In most jurisdictions mortgages are strongly associated with loans secured on real estate rather than other property (such as ships) and in some cases only land may be mortgaged. Arranging a mortgage is seen as the standard method by which individuals or businesses can purchase residential or commercial real estate without the need to pay the full value immediately. |  |
| | | REFINANCE:
|  | The process of paying off one loan with the proceeds from a new loan (usually for a lower interest rate) using the same property as security. Maybe you bought when interest rates were higher. All you could qualify for at the time was an adjustable-rate mortgage (ARM). With today's lower rates, you can qualify for a fixed-rate mortgage, which you'd prefer. One reason to refinance is to change the kind of mortgage you have. Other reasons to refinance are to lower your monthly mortgage payment, to consolidate several debts (like credit cards) into one relatively low-interest rate loan, and to convert some of the equity in your home to cash to use for other purposes like remodeling or for college tuition.
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| | | HOME EQUITY LOAN:
| Sometimes referred to as a second mortgage or borrowing against your home. The loan allows you to tap into your home's built-up equity, which is the difference between the amount your home could be sold for, and the amount that you still owe. Homeowners often use a home-equity loan for home improvements, to pay for a new car, or to finance their child's college education. A home-equity loan is a good way to borrow money for two main reasons: 1.) the interest rate is usually one of the lowest loan rates a borrower can get and 2.) the interest you pay on the loan is usually tax-deductible. But taking out a home-equity loan also means the lender can take possession of the home if the loan isn't repaid.
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