Millions of Americans have borrowed against the equity in their homes over the past five years as values, and corresponding equity, have risen into the stratosphere. Homes aren't inexpensive; a large number of homeowners will spend most of their lives paying for one, and borrowing against one isn't cheap, either. Buying a house or borrowing against one by taking out a home equity loan is an expensive task.

There are a number of different places you could meet with in order to obtain a loan; the most common are banks and mortgage companies. There are pluses and minuses to borrowing from any particular type of lender, as we shall shortly see.

Both banks and mortgage companies are in the business of lending money, but they have differences, too.

Banks handle savings and checking accounts as well as lending of other types, such as for auto or SUV loans. Banks lend money for buying houses, but lending is merely a portion of what they do.

 

Mortgage companies have a single objective; they loan funds for property. The business of mortgage companies is tightly focused on sales of real estate.

By emphasizing only one product, a mortgage company will likely present a wider variety of lending options, including unconventional types of adjustable rate loans and loans or mortgages requiring no down payment. A mortgage company solely specializes in home loans. Mortgage companies may offer rates of interest that are a bit lower than at banks, particularly if competition in your community is fierce. A mortgage company may be a somewhat more flexible in terms of whether or not you will meet the requirements for a loan at all, and they may have extra lending opportunities available to you if your credit history is less than perfect.

As banks are likely to do quite a few things in addition to lending for real estate, your nearby bank probably has only a couple of types of housing choices available. Customers are more often known at their bank, where they do business often, than they are at a mortgage company, where they may do business only one time. Your bank may be able to extend better customer service to you, particularly if you are an an old customer or are well known to bank personnel. Your neighborhood bank can likely make a fifteen year or thirty year, fixed-rate loan available to you, and they may offer a couple of adjustable rate loans.

There are lots of kinds of customers who need a wide variety of mortgages, which means there is no perfect answer to the question of where to borrow for a mortgage. There is no quick or obvious answer to whether you should borrow from a mortgage company or a bank. One individual may find that a bank works best for them and another may find that a mortgage company suits them better.