Everyone has heard a friend or relative complain about having to take out a second mortgage but don’t really know what that means. Let’s find out! The real term for this is called a home equity loan. This is a common loan type that homeowners can use for whatever they want. A home equity loan requires that you use your house for collateral just like a normal home loan. There are different types of home equity loan out there and you can always use the money for whatever you want.

Another common type of home loan is the adjustable rate mortgage or ARM. With this type of loan, the interest rate will fluctuate depending on the 6 different real estate indexes. The interest rate changes so the lender of the loan gets a proper margin. That’s due to the fact that the indexes influence the cost of funding that loan in the first place. Basically, your lender lets you take on a little bit of the interest risk instead of just the lender like in a fixed rate loan. This type of loan can be great if the interest on your home loan consistently falls for a long time.