Mortgage Loan vs. Home Equity Loan and what to know about each.

The great American dream for many people means owning their own home. To achieve this goal, most homeowners will need to take out a mortgage loan to cover the costs. Then, once you own your home, you’ll have more options for financing other life goals.

But, how do you know what kind of loan you’ll need? Mortgages and home equity loans both use collateral (your house) to secure them. Which loan is appropriate depends on your needs. If you’re a first-time home buyer, you likely have many questions. Let’s break these down.

If you’re looking to buy a house and do not plan to pay the cost in full, you’ll need a mortgage loan. Mortgages generally are taken out for the negotiated price of the loan minus any down payment (usually 20% of the purchase price) and are to finance your primary residence.

Mortgages come in a variety of options. There are both fixed-rate and adjustable rate mortgages, construction mortgages, jumbo mortgages (for loan amounts over $453,100), and government-supported mortgage programs (USDA, FHA, VA and PHFA). Each type of mortgage has its own set of qualifications and benefits. It may seem like a lot of options, but our experienced loan originators can help you choose the type of mortgage that best suits your circumstances.

Home equity loans – sometimes called second mortgages – take the value of your home minus the amount you owe and allow you to use the cash difference to finance other goals or projects. In other words, it’s using the equity you have already paid into your home as a separate loan.

Some common reasons to take out home equity loans include planning a major home renovation or addition, refinancing your original mortgage, using the lower interest rate on a home equity loan to consolidate credit card debt into one monthly payment, finance tuition costs, or even paying for a wedding or vacation.

Before you take out either type of loan, you’ll need to make sure you can comfortably afford the payments. When you purchase a home, you’re not just planning for the principle and interest on a loan. You’ll also have to consider the costs of insurance, taxes, utilities and upkeep of the property in conjunction with your regular food, car, credit card, and discretionary spending. Use our Maximum Mortgage Online Calculator to help you calculate which loan amount best fits within your lifestyle.

Purchasing a home can seem a big deal with a lot of financial decisions, but don’t worry! We can help you determine your specific needs and how to best address them. Customer service is the hallmark of Standard Bank and our loan originators work one-on-one with customers throughout the entire loan process. We take the time to make sure you understand your options and are comfortable with them.

To learn more about loan options, loan rates, or apply online, visit our website at or stop by your local Standard Bank office (find the location closest to you).


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