For most first-time homebuyers, mortgage loans can be challenging, to say the least. With all the real estate jargon, paperwork and more it’s easy to feel confused and overwhelmed.  

There are a lot of different types of mortgages out there which makes all these seem even more overwhelming. But knowing about the different options can help you find and secure the type of mortgage that is best for your and your situation.

One type of mortgage not too many people know about is called a Future Advance Mortgage. What is a future advance mortgage, you ask?

Read on to find out what one is and how you can use one to finance a home.

What Is A Future Advance Mortgage?

A future advance mortgage is basically a way for you (the borrower) to access more money to increase the amount of your mortgage in the future. And it does that in a way so you don’t have to change the terms of your current mortgage contract.

Or, put more simply, with a future advance mortgage, you buy property with part of the loan. Then, it gives you more money later if/when you need it.

One situation where this type of loan may be helpful is if you are building a new home. With a future advance mortgage, you can access the first loan in order to buy the land for the home and the second loan to build the home.

For mortgages, your home and/or property is used as collateral for the loan. So if you default on your mortgage, the lender can take ownership of the property.

With a future advance mortgage, your property will still act as a collateral for the initial loan but also for any more loans you take out in the future.

Another part of future loan mortgages is that they are a way for you to get a mortgage and a home-line equity line of credit at the same time.

As with pretty much everything, there are some downsides to this type of loan. One is that, if you default on repaying the loan, it is easier for the lender to take your property away from you. You also have to keep an eye on the fees involved in this type of mortgage.

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