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It is Very Simple
A Mortgage loan is a loan granted to the borrower so that he or she can buy the property, using the house that is purchased as collateral, or security towards the repayment of the borrowed sum. The typical borrowers are tenants who wish to purchase their first home. It can also be the case of people who want to buy property when they already have their primary residence and want to affect the purchase to business or rent.
A homeowner loan, on the other hand, is a loan granted to someone who is already a homeowner and wishes to purchase an item other than real estate. This is a secured loan, using the equity in the home to back up the borrowed amount, obtaining similar interest rates and conditions to a home equity loan or a mortgage loan.
There is no definite interest rate for each type of loan and these may fluctuate, depending on the area of the country and the nature of the loan, between 5 and 10 percent. The repayment plans are generally shorter than mortgages, and the fees are similar. There will be an appraisal of the home to establish the value and discount any mortgages or other pending homeowner loans to establish the free equity.
Being a secured loan, it has a very low risk for the lender, if any at all. The only loss would be the hassle of repossession, should this be necessary, since every other cost is covered by the product of the sales. This means that the amount of the loan is determined taking these aspects into account.
Let us suppose that a loan has been granted with a payback period of three years. After one year, there has been an important increase in the price, due to market circumstances. This means that you have repaid one third of the loan, releasing the corresponding equity, and also the total value of the property has increased in the year elapsed, adding even more equity. Even if you used up all the equity at the time you took the loan, after a year or two you will be able to use the same property to request a loan using the new equity.
Homeowner loans can give the borrower some additional benefits, such as payment vacation or prepayment, as well as the possibility of raising an important amount of cash in spite of having bad credit.
As examples of what one can do with this kind of loan, we can mention buying a brand new car, paying for an important vacation or redecorating the house. In other words, we do not need to inform the lender what use we will give to the loan, since it does not affect the outcome at all.