Mortgages are likely the cheapest way to borrow money in town. A mortgage is a type of loan that uses the property that is being bought as security for the loan. A mortgage is the easiest and cheapest kind of loan to get because the person who gives you the money is also buying the house. One doesn't really own his or her house until that loan is paid off.
There are many different kinds of home loans. The fixed rate mortgage (FRM) and the adjustable rate mortgage (ARM) are the two main types of amortised loans (ARM)
Fixed-rate mortgages have set interest rates and terms for how long it will take to pay off the loan. This rate won't change, so the person taking out the loan won't have to worry about it. They know that even if interest rates on their mortgages go up, they will still pay the rate they locked in.
Adjustable-rate mortgages still have a set number of years, but the interest rate changes every year depending on how the economy is doing. This can be great if the economy is doing well and the interest rates are low for a few years, so you can save money. But it could also go the other way. It's up to you to decide.
Getting a loan against your home is called a "second mortgage." Let's say you paid $25,000 toward your mortgage on a house you owned for a few years. You could get a second mortgage for $25,000. This would mean that you no longer own any of your home, but you would have $25,000. Again, this type of loan is the most affordable loan you can get.
You might be wondering why mortgages are so cheap. There are two main explanations for this; 1. Houses almost always go up in value, which means they are worth more each year. Every other type of asset for which someone could get a loan will lose value. 2. Banks own your house until you pay back the loan, so if you can't pay back the loan, they foreclose on your house, kick you out, sell it for more money (appreciation value), and go about their business as if nothing happened. It's safe, and that's about it.
