Ways to borrow...

A mortgage is simply a loan that's secured by your house, so you'll use one to buy a house, or if you already have a house and a mortgage, you might want to replace (refinance) your existing loan with a new one to get a better interest rate.

Either way, you really want the best possible deal because even one measly percentage point... say the difference between 6% and 7%... on a $200,000, 30-year mortgage is nearly $40,000! That's money you want to keep in your pocket, not pay to a lender.

So if you're already an expert, start your mortgage search. But if you'd like to learn more, it will definitely be time well spent. To start down the path to mortgage mastery, let's check out some terms you'll see when you start your mortgage search.

What is an Interest Rate? This is the rate the lender is charging for the loan. Duh! But here's something you may not know: the interest rate doesn't really matter all that much. In fact, a low interest rate is something lenders might use to lure in unsuspecting borrowers. That's not you. Look at APR instead.

What is an APR? APR stands for Annual Percentage Rate, but it's different from the interest rate... The Annual Percentage Rate includes fees that the lender is putting in your loan. That's why the APR is always going to be higher than the Interest Rate... And why the APR is a much better determination of what you're actually going to be paying on your mortgage.

What are points? Also known as discount points or origination points, they are nothing more than additional fees the lender is charging to make more money. But rather than being a fixed dollar amount, one point is the same as one percent of the mortgage. So if you're borrowing $100,000 and there's one point, you'll be charged an extra $1,000.

What are fees? This term isn't hard to understand, but when you look at the list of fees you'll often encounter while mortgage shopping, you might think you're on another planet. That's the way the lender likes it. The more confused you are, the more money they make.

What is a lock? When you borrow mortgage money, there's a lot of stuff that has to happen. The house has to get appraised, your credit has to be checked, a pile of paperwork has to be created and signed... And while all that's happening, interest rates can change. So a lock is how long the lender will "lock in" the rate/APR you've agreed to. 30 days is the minimum amount of time you should get a lock, but 60 is better.

A home equity loan is a lump-sum loan with a fixed interest rate, much like the loan you used when you first bought your house. You'll get one big check and pay it back over a preset period, so you know exactly what you're paying each month.

When should I use a home equity loan? If you need to borrow against your equity and want a lump sum, fixed payments and a specific date when your loan will be paid off, a home equity loan or second mortgage is for you. Common examples are adding a room or buying a car. If you'd rather just have the ability to borrow odd amounts at odd times, you might be better off with a home equity line of credit, or HELOC.

A Home Equity Line of Credit is a lot like a credit card. Based on the equity in your home, you'll be approved for a line of credit that you can spend in different amounts at different times. So you can borrow a few thousand dollars, pay it back and borrow more. And, as with a credit card, the interest rate and payment on this loan normally fluctuate.

When should I use an HELOC? If you want a "just-in-case" place to get quick or emergency cash, a home equity line of credit is for you. Example? Suppose you're sending a kid off to college. You're not even sure if you'll have to borrow at all, and if you do, it's going to be odd amounts spread over four years, so you want the ability to borrow, pay back, and borrow more. On the other hand, if you'd rather borrow one lump sum and make consistent monthly payments, you might be better off with a Home Equity Loan.

Most people start the car-buying process by visiting a few showrooms and kicking some tires. Better way? Find the right financing first. Being pre-approved for a loan in advance means you'll know exactly what you can borrow and what the payments will be. You'll be just like a cash buyer: ready to drive a hard bargain because you'll be able to buy on the spot. And if the dealer is offering better terms... like an interest free loan... all the better!