Mortgages and Home Equity Loans
How Columbia Bank Stays Competitive
Columbia Bank strives to offer the most competitive mortgage rates in New Jersey and to always provide our customers with the best mortgage and home equity loans possible. As the market fluctuates, mortgage rates can change. If you opt for a fixed mortgage rate loan, your interest rate will stay constant for the life of the loan, while adjustable rates are subject to change over the course of the loan. For more in-depth information about our mortgage offerings and mortgage rates, see our Mortgage FAQ page, or take a look at our current mortgage rates.
How Does a Mortgage Work?
A mortgage loan is a long-term loan obtained from a bank, financial institution, or other lending organization, often used to purchase, construct, or improve a home or piece of property. Mortgage loans are usually paid off over 15 to 30 years, with low-interest rates compared to other large loans. A mortgage loan works to provide low-interest rates for long-term repayment, because the lender's risk is insured by a security interest in your real property.
A defining characteristic of a mortgage loan is that the loan is insured by some sort of real estate or property, over which the lender has conditional ownership, called a mortgage lien. When mortgage loans are used to purchase property or a home, the mortgage lien is the legal claim of the lender to the property or home in question. If the borrower defaults on their payments, the lender then has the right to seize the lien as collateral (foreclosure). A common misconception about mortgage loans is that they can only be used for home or property-related purchases, when in fact, the loan money can be used for any purpose. The loan must be insured by some sort of real property, but if the borrower already has some sort of real property to offer as collateral, the mortgage loan money itself can be used to pay off debt, start a business, etc. Some lenders do have certain conditions regarding how their mortgage loan money can be spent, but this varies by lending organization and specific loan.
Mortgage loan repayment works through a process called amortization. When you take out a mortgage loan, you agree to pay back the principal amount (actual loan money) in addition to interest over a specified period of time. Because the interest can add up to more than the principal amount, an amortization schedule (provided by your lender) balances out the interest and principal cost over the course of the loan repayment. A borrower pays off more interest to start, and the ratio gradually reverses to where the borrower pays off more of the principal as the loan nears its end. This way, the payment amount is able to remain stable over the course of the loan. If you're considering refinancing your mortgage, an amortization schedule is an essential tool in learning how much money you can save.
When working out the terms of your mortgage loan, it is important to understand all aspects of the loan, including your interest rates, amortization schedule, and payment terms (such as, for example, whether you can prepay extra principal payments on your mortgage if your budget allows). Pay attention to detail, as what may seem like slight adjustments can actually have a big impact on the amount you end up paying.
Columbia Bank offers competitive home mortgage rates, with a variety of fixed-rate mortgages or adjustable-rate mortgages with more flexible terms, depending on your preferences and needs. We also provide pre-approved mortgage certificates, so you can have your finances in order before you go shopping for your dream home!
Still have questions about how mortgage loans work? Visit our mortgage loan center where you will find information about our various mortgage options and rates, as well as additional mortgage-specific FAQsand an extensive mortgage glossary. You can also always email a mortgage specialist with questions.
What is a Home Equity Loan?
A home equity loan is a loan or line of credit that allows you to use your home or property as collateral to obtain relatively low interest rates, similar to a mortgage loan. Home equity loans can be used to fund major expenses, such as home improvements, healthcare expenses, education fees, or credit card debt relief.
Home equity loans are sometimes referred to as "second mortgages" because they are also secured against the value of the borrower's home or property. The difference between a home equity loan and a mortgage loan is that, while mortgage loans can be used to fund the initial purchase or construction of a home itself, home equity loans can only be secured against a home or property that the borrower already has equity in. The equity is the home's current value minus any amount still owed on a primary mortgage, which is the maximum amount that a borrower is allowed to borrow against.
There are two types of home equity loans. Fixed-rate home equity loans have a fixed loan amount, set payment term, and a fixed interest rate, while home equity lines of credit (HELOC) generally have a fluctuating interest rate, and the borrower can choose how much and how often to borrow against the maximum equity amount.
Home equity loans are typically shorter-term and charge slightly higher interest rates than primary mortgages. However, relative to most credit cards, home equity loans or home equity lines of credit have low interest rates and are tax-deductible, which makes them an ideal type of financing for major expenses. In addition to financing major expenses, consumers often use home equity loans to consolidate all of their debt into one monthly, low-interest payment with tax benefits.
Home equity loans are an attractive financing option for many, but it is important to also recognize the risks of borrowing against your home. You should work with a financial specialist and evaluate your equity, financial stability, and spending habits, and be sure you understand all of the terms of a home equity loan or line of credit before making any decisions.
Columbia Bank offers both fixed rate home equity loans and variable rate lines of credit, and we have mortgage and home equity specialists who are happy to work with you to determine if a home equity loan is the best solution for your financial needs. We are proud to provide some of the most competitive mortgage and home equity loan rates in New Jersey. Contact Columbia Bank or visit our home equity loan center to learn more or apply now.