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PURCHASE
When you want to purchase a new home, a "First Mortgage" is created. This mortgage can cover up to the full price of the home, sometimes more. Some buyers can purchase a new home, without putting any money down, and in some cases even walk away with extra cash.
SECOND MORTGAGE
A "Second Mortgage" can be taken out on your existing home against the "equity" you currently have. Some lenders will allow you to use 125% of your homes current value to determine equity. Thus, on a 200,000 home, if you owe 100,000 on your First Mortgage, you could borrow up to $150,000.
REFINANCE
People usually Refinance their
current mortgage (s) to get a lower interest rate or borrow more money. This is
another situation where you could get 125% of your homes value because you are
"refinancing" the entire value of your home.
"Refinancing" is the process of paying off one loan with the proceeds from a new loan using the same property as security.
HOME IMPROVEMENT
Any of the above three types
of loans could be used here, but you are simply stating that you will be using
the funds to improve the home.
DEBT CONSOLIDATION
Because Mortgage Rates are
usually 2 to 3 times lower than Interest Rates of Small Bank Loans, Credit
Cards, etc., many people choose to pay off all their bills with funds from a
mortgage. This can be a very wise move as it not only relieve you of the
multitude of monthly bills, but the accruing high interest rates on many small
loans is very expensive in the long run.
