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Types of Morgage 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, morgages 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 morgage loans, first and second. First and second refer to the priority a morgage will take in the chain of title. First will always takes precedence over second in a chain of title.

First morgage loans

The most common type is the loan you get when you buy a house. It is simply known as a first morgage. 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 morgage loan is known as a Refinance Loan. Since there can only be one first morgage at a time, a refinance loan will always be for an amount that will equal or exceed the existing first morgage loan. The existing first morgage loan will be paid off, and the new morgage associated with the refinance loan becomes the new first morgage 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 morgage loans

There are a variety of type of second morgage 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 morgage. The collateral for the loan typically is the equity (current market value minus all outstanding loan amounts) that exists for the property. Second morgage loans can be:

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