Federated Lending Corporation

Helping You Achieve Your American Dream

No broker fees, No hassles, low rates

Mortgages VS Home Equity Loans

Buying a home in New Hope PA is exciting and filled with options. It’s vital for potential home buyers to understand the mortgage “lingo” as they embark down the home ownership path. 

A common misconception is the difference between home mortgages and home equity loans. They are NOT interchangeable. 

Here are four important points borrowers must understand about home equity loans and home mortgages. 

Mortgage Loans Come First, Home Equity Loans Come Second

A mortgage loan pays for the home on the front end. The borrower goes through the loan approval process and secures the loan to buy the home from the seller. A home equity loan is secured after that, as a lump sum that is based off the equity built up in the home. 

Mortgage Loans Are More Often Tax Deductible

As of 2018 mortgage loan interest is tax deductible up to $750,000. Home equity lines were once tax deductible, but this year more stipulations were added for the borrower to be able to deduct the interest.

Home Equity Loans Offer Flexibility

Borrowers must use home mortgage loans for buying a house. Home equity loans can be used to purchase a vehicle, pay for a college education, or eliminate credit card debt. 

Home Equity Loans Have Higher Interest

In the case of foreclosure the mortgage loan creditor will get paid first. This leaves home equity loan creditors with more risk. As a result, home equity loans typically come with higher interest rates. 

When talking about the difference between home mortgages and home equity loans, potential borrowers should understand the advantages and liabilities of both before deciding how to proceed. Talking to a professional lender is the first step in making the best decision.

Main Navigation