Sometimes, people can be tempted to use the terms “mortgage” and “home loan” interchangeably when discussing getting mortgages in KC. While they are very similar, there are some key differences that you, as a borrower, need to be aware of.
The reason home loans and mortgages are so often used interchangeably in conversation is because of how closely their related and work together. For example, when you take out a home loan to purchase your home, you then sign for a mortgage agreeing to pay back the home loan in monthly payments. In order to understand how your home buying process works, you must understand the difference.
A home loan is the actual money that you take out to pay for your home. Home loans have either adjustable or fixed rates that determine your mortgage rate. Home loans are generally only used to purchase a residential home.
There are many different types of home loans and the home loan you choose is determinate on your personal situation and what you can afford:
On the other hand, mortgages are types of loans that are secured for real estate that, as the borrower, you need to pay back in full in order to fully own the property. Unlike a home loan, a mortgage is the legal document that shows your agreement and obligation to repay your debt to the lender.
The property you purchase is the collateral to help the lender ensure that you pay your mortgage payments. If you do not pay your mortgage payments, the bank can foreclose on your property and sell it to someone else. Mortgages can be used to purchase any piece of real estate, be it residential or commercial.
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