What is the difference between a mortgage and a home equity loan

What is the difference between a mortgage and a home equity loan Introduction: The Foundation of Real Estate Financing Hello, everyone! When it comes to purchasing or financing a home, two terms often come up: mortgage and home equity loan. While they both involve borrowing money, there are significant differences between the two. Today, we'll explore these distinctions, helping you make informed decisions in the realm of real estate financing. Section 1: The Mortgage - A Pathway to Homeownership A mortgage is a loan specifically designed for purchasing a property. It's typically a long-term commitment, spanning 15 to 30 years. The loan is secured by the property itself, which means if the borrower fails to make payments, the lender can foreclose and sell the property to recover the debt. Mortgages usually require a down payment, which can range from 3% to 20% of the property's value. The interest rate on a mortgage can be fixed or adjustable, depending on the terms agreed upon. Monthly payments are made, consisting of both principal and interest, gradually reducing the loan balance over time. Section 2: Home Equity Loan - Tapping into Your Property's Value A home equity loan, on the other hand, is a loan that allows homeowners to borrow against the equity they've built in their property. Equity is the difference between the property's market value and the outstanding mortgage balance.