Hawaii Home Loans or Mortgages – Which One to Choose?

September 26, 2010 by  
Filed under Mortgage

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Home loans and mortgages are known as facilities that allow individuals to acquire assets without needing to pay an amount in full on the spot. Building a home equity loan will lead to a debt that can be seen in the value of the borrower’s house. As this loan is designed, the equity that is built will act as collateral for the home loan.

In this case, collateral refers to a back up asset that can repay the debt in the event of un-payment. With the real estate term, the equity set in an asset means the difference that exists between a property market price and the borrower’s house equity loan. Equity will represent the interest paid by a borrower on the loan.

On the other hand, mortgage implies the process through which one presents the property as a security to make the debt repayment. It is considered a device to secure an asset. Arranging for a mortgage, the borrower can acquire a residential place as well as a commercial space, not needing to pay in full for the price of the acquisition.

Now the question is: which one to go for – a home loan or a mortgage? You should first revise the following:

* The majority of the home loans will check on an individual credit history needing to have it as a good record. Therefore, those persons who have an average credit history can expect to have their request for a loan denied.

* ‘Closed-end Home Equity Loan’ sets a fixed interest rate for a period up to 15 years. By the end of the settlement there is a lump sum of money which is known as the transaction. Once this one is concluded, there is no other loan that a borrower can get as an extra loan. A borrower can obtain a maximum of a sum that depends on the income, credit records and the value of the collateral along with other aspects financially related.

* ‘Open-end Home Equity Loan’ is known as the loan that has a flexible interest rate. The borrower is the one to decide when and how he can borrow the money while putting the equity on the stake. This is again dependent on the credit report, income and other finances related criteria. Through this loan one can extend the repayment period up to 30 years.

* Mortgage loans are represented by two main types:

– The Fixed Rate Mortgage – FRM – that goes for a fixed amount that needs to be monthly paid while the term goes from 10, 15, 20 to even 30 years. Some lenders even extend the term up to 40 and even 50 years.

– Adjustable Rate Mortgage – ARM – can be fixed for some time after which this one can be adjusted according to the index indicated by the market. These rates are adjusted at periods of time (months or year) and can be set in ranges of 0.5% to 3%.