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Types of Mortgage Loans Real estate differs from most other types of items because it is considered to be a form of real property. Real property means land, and generally whatever is erected or affixed to the land, such as buildings, fences and including light fixtures, plumbing and heating fixtures or other items which would be personal property if not attached. There are different methods and laws that exist to define ownership and other issues regarding real estate. At the heart of all of this is something called a chain of title. Title is the record of ownership, and chain is the order (sequence) of claims against the ownership. Things like property tax bills, mortgages and mechanic's liens can be (and are) recorded as a claim against your property in a "chain" (by date of recording). Fundamentally, there are just two types of mortgage loans, first and second. First and second refer to the priority a mortgage will take in the chain of title. First will always takes precedence over second in a chain of title.

First mortgage loans

The most common type is the loan you get when you buy a house. It is simply known as a first mortgage. The loan can have a fixed or variable interest rate, a balloon and/or various term lengths (30 year, 15 year, etc.)

Another type of first mortgage loan is known as a Refinance Loan. Since there can only be one first mortgage at a time, a refinance loan will always be for an amount that will equal or exceed the existing first mortgage loan. The existing first mortgage loan will be paid off, and the new mortgage associated with the refinance loan becomes the new first mortgage in the chain of title. If the amount of the refinance loan exceeds the amount due on the original loan the difference is referred to as "cash out".

Second mortgage loans

There are a variety of type of second mortgage loans usually based on the purpose for the loan. Regardless of what the loan is called, they are all fundamentally the same; and they are subordinate to the first mortgage. The collateral for the loan typically is the equity (current market value minus all outstanding loan amounts) that exists for the property. Second mortgage loans can be:

• home equity loan
• home equity line of credit
• debt consolidation loan
• home improvement loan