Buying a home can be one of the most important and exciting purchases you make. There are several things to consider; besides choosing your ideal home, you most likely will need help financing it. At Camino, we understand it can be an overwhelming undertaking to decide to purchase your home. We’re here to help you learn more about the difference between a Camino home equity loan versus a mortgage. That way you can better decide which type of financing best suits your individual needs.
Both mortgages and home equity loans are financing options that use your home as collateral. With either loan, should you default on your payments according to your agreed upon terms, you could possibly lose your home.
However, if you need financing to purchase your first home, a home equity loan is not a borrowing option. You’ll need a mortgage to finance your home. You can only take out a home equity loan after you acquire equity on a property. A home equity loan is a viable option for a second property or vacation home. To purchase your first property, a mortgage could be your best option.
What You Need to Know About Mortgages
At Camino, we offer two primary types of mortgages: a fixed-rate mortgage and an adjustable-rate mortgage (also known as an ARM). Our experienced member advisors can help you determine what’s best for your particular needs.
What is a Fixed-Rate Mortgage?
With a fixed-rate mortgage, your interest rate is set at a specific rate that remains the same for the entirety of your loan. Because your rate is locked in, you will pay the same amount of principal and interest each month, which can help you budget your monthly expenses. In addition, no matter what happens in the financial world, you can have peace of mind that your loan will stay the same.
A fixed-rate loan is optimal if you’re planning on staying in your home for a while or if you don’t want to incur higher interest rates should they go up. Camino has a range of short or long term fixed-rate mortgages to meet your borrowing needs.
What is an Adjustable-Rate Mortgage?
Unlike a fixed-rate loan, an adjustable-rate mortgage offers flexibility and initial lower rates. With an adjustable-rate mortgage, your initial interest rate and payments stay the same, typically three to 10 years, and then adjust monthly for the life of your loan.
The payments for the remaining period of your loan are based on interest rates, a benchmark rate index, and the terms of your original loan. However, since your payments will fluctuate as interest rates rise, so will your payments, and if they fall, they’ll decrease.
If you only plan to own your home for a short period of time or if you anticipate your income to increase, many of Camino’s adjustable-rate mortgages offer flexibility, lower interest rates options, and interest rate caps that protect you from rising rates.
What is a Camino Home Equity Loan?
A home equity loan is often used as a second mortgage. The main differentiator between a Camino home equity loan versus a mortgage is that a home equity loan is secured by a homeowner’s equity in a property. It’s taken out after you’ve purchased your home using a traditional fixed-rate or adjustable-rate mortgage. The equity is determined by the homeowner’s equity in a property, which is the difference between your property’s value and the existing mortgage balance.
Need a Camino Home Equity Loan or Mortgage? Contact us today!
Let Camino help you with your home purchase and financing needs by helping you better understand the benefits of a Camino home equity loan versus a mortgage. We want our members to find the best loan and financing option that works for them and their specific needs. Camino offers a variety of loans to ensure you receive the right support for the reason you’re borrowing money. Each loan comes with different terms that help determine what you’re most qualified for. Please go online at caminofcu.org, give us a call at 800-835-3400 to speak with one of our Member Advisors, or contact us for more information.