A home mortgage loan is a loan that is used to purchase, improve, or repair a home. This loan is typically used to purchase a home outright, or to help finance the purchase of a home using a down payment.
Here's a quick breakdown of the most common types:
1. Conventional Loans
Conventional loans are the most commonly used type of residential mortgage loan. They're based on a fixed rate, which means you'll likely be paying the same amount of interest over the life of your loan.
2. Interest-Only Loans
An interest-only loan is a great option for borrowers who plan to stay in their homes for a long time but don't need immediate access to cash flow. With an interest-only mortgage, you pay only the interest on your loan while your principal balance remains unchanged. This means that if you decide to sell your home before your term is up, you'll still owe the original principal amount – no matter what! Interest-only loans also have one big downside.
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3. Adjustable Rate Mortgage (ARM)
An adjustable rate mortgage (ARM) is similar to a conventional loan in that it has a fixed rate and terms that last for up to 30 years; however , ARM loans are based on an adjustable rate, which means the interest rate you pay can change over time.
4. Home Equity Loan
A home equity loan is a great way to borrow against the value of your home – essentially, you're borrowing money against the equity in your home. This can be a great option for people who either don't need or can't access traditional financing options, or who want to use their home as collateral for a loan.