As an existing homeowner looking for a 2nd mortgage or wanting to refinance your current mortgage, you might think home loans are all the same. Unfortunately, mortgages vary greatly from lender to lender. Your challenge is to sort through all the terms, conditions, fees, and annual percentage rates to find the best deal for your family.

This is not an easy task; if you do your homework and learn how mortgages work you will recognize a good deal when you see it. Home equity loans and 2nd mortgages are a booming business in today’s market. If your home has recently gone up in value you might consider using one of these loans to secure the equity in your home.

Which should you choose: a home equity loans or a second mortgage? A 2nd mortgage would allow you to borrow a fixed amount and have a set repayment schedule. You could even get a fixed interest rate. This is an excellent choice if you need to borrow a large sum and want to pay it back over a long period of time. Home equity loans are most often referred to as “Home Equity Lines of Credit.” The advantage of an equity line of credit is that you can borrow smaller amounts and only borrow when you need it. This is ideal for the homeowner who exhibits self control over their finances. If this does not describe you a home equity line of credit may not best loan for you. You could find yourself using equity for impulsive purchases you might not otherwise make.

Home equity lines of credit offer convenience in that you can write checks or use a debit card to pay for purchase. The downside for home equity lines is that nearly all of them come with variable interest rates that are much higher than 2nd mortgages.

The first thing you should do before shopping for a mortgage is review your credit report. You can get one free copy of your credit report every year from each of the three credit bureaus. If you find mistakes you will need to contact the corresponding credit bureau to dispute the errors. It is important to correct errors prior to applying for a mortgage. If you are unsure where to start with your credit report you can get a free report from each bureau by visiting: annualcreditreport.com

Shopping Around

The biggest mistake homeowners make is settling for unfavorable terms or a high interest rate because they did not shop around for their mortgage loan. Mortgage lenders are required by law to disclose all fees and the interest rate in the form of the loan’s Annual Percentage Rate. Carefully compare terms and fees from one lender to the next using this APR. Don’t be afraid to negotiate with your lender for more favorable terms. Haggling with lenders is a skill most people have to learn; there are resources below that can help you with that.

Louie Latour has twenty years of experience in the mortgage industry as a mortgage broker. He is the owner of Mortgages for Dummies, a mortgage resource site called Mortgage Refinance Advisor, devoted to saving homeowners money with a free guidebook “Five Things You Need to Know Before Refinancing a Mortgage.” http://www.refiadvisor.com