Owning a piece of land or property is a lifetime dream for every individual. Purchasing and moving into a dream house would generally rank among the top three things on the wish list of most people. Taking a home loan nowadays has become very simpler. There are many home loans provider in the market to make your dream come true. The most important thing is you should know about each and every term related with Home Loans before applying for a Loan.
There are different types of home loans tailored to meet your needs.
- Home Purchase Loans: These home loans help you for purchasing a new home.
- Home Improvement Loans: These loans are given for implementing repair works, healing and renovations in a home that has already been purchased.
- Home Construction Loans: These loans are available for constructing a new home.
- Home Extension Loans: These loans are given for expanding or extending an existing home.
- Land Purchase Loans: These loans are available for purchasing land for both construction and investment purposes.
- Bridge Loans: Bridge loans are designed for people who wish to sell the existing home and purchase a new one.
There are also different modes of lone payment that a home buyer can choose according to his convenience based on the risk and advantages.
Basic loans are variable loan rate with a relatively low interest.
Advantages: You’re paying a relatively low rate which may mean you can pay off the loan faster.
Risks: They often don’t have the features and flexibility of having other loans.If rates rise, you still have to afford to pay repayments for your loan.
Standard Variable Rate Loans
These loans are similar to basic loans but offer a few more features and flexibility.
Advantages: They provide option to split between fixed and variable rates; allowing you to make extra repayments without penalty; and portability.
Risks: They have risks similar to basic loans.
The interest rate is set for a particular term usually one to five years so your repayments are set for that period.
Advantages: You have the security of knowing exactly what your repayments will be and can budget accordingly. At the end of the term you can lock in another fixed rate
Risks: Fixed loans also often have limited features and lack the flexibility of variable loans.
Equity Line of Credit Loans:
These loans help you use the impartiality of your home to finance on other things such as renovations or to invest in other assets such as shares or funds.
You generally need to have a large deposit in your account to enjoy the pros of this loan.
Advantages: The extra funds are provided when needed without applying for a separate loan or get special approval.
Risks: They are sometimes more expensive, so you could only pay interest and not reduce the principal or even eat into the equity you’ve built.
Packaged Home Loans:
Packaged home loans are offered by banks to people in a particular profession.
Advantages: Depending on the institution you get a discounted rate both for home as well as other products.
Risks: You may be tied to the one institution for a range of services which can be limiting. The benefit of the reduced interest might be much less.
No deposit loans:
With a no-deposit loan you can borrow 100 percent of the purchase price.
Advantages: You can buy property sooner, as you don’t have to wait until you save an adequate deposit
Risks: They have stricter lending criteria and approval can be harder