Worried about getting adequate funds to buy your own house? Well, that’s indeed a concern that needs to be addressed properly to get the required funds. In case you find it difficult to get the required amount of money you can definitely go for a home loan. You can even get an amount of 90% of the total value of your home.
There are numerous things that one needs to keep in mind to get the best financial aid. The first thing that an individual should consider whilst opt for a loan is the interest rate that will be charged. If you end up applying for a wrong loan solution then you might fail in repaying the loan and eventually lose your house. Hence in this article, we will go through some of the effective things that one needs to keep in mind to get a good home loan.
Ways to get a good home loan
Following are some of the important things that one needs to keep in mind to find the best home loan:
Make holistic research – A good research is very helpful and utterly important to find a good home loan. There are various types of loans available in the market. You should choose which plan you would like to go with. Moreover, you should also try to find out the interest rate that will be charged by the loan provider. You can also get an online comparison done on the interest rates.
Maintain a good credit report – Maintaining a good credit report is imperative to get a home loan sanctioned ink your name. You need to make sure that there is no negative marking s in your credit history. In case there is a negative mark on your credit history or your credit score is poor, you will have to take adequate measures to get it corrected and only then apply for a loan. However, various loan providers also provide a loan even if the applicant has a bad credit history.
Make regular payments – It is very important to make regular payments of the EMI. That way you will be able to repay the entire amount with ease and also save your credit history from being affected. In today’s world, one needs to keep their credit score in the best possible form.
Going for portable loans – If your job is such that it requires you to be transferred on short notice you should get a portable loan. You can easily transfer this loan to another property of your choice without any hassle. Therefore, if you have any plans for relocation ink the future it would be best to get this loan.
These are some of the most important things that need to be kept in mind to get a home loan from a reliable source. Good research over the internet will definitely help you o make a good choice in this regard.
Types of Home Loans You Can Opt For
You dream of living in your house – in the heart of the city, from where you can commute easily and have all the amenities. But, the sad truth is that you do not have enough money for either buying your dream home or renovating your existing home to your dream house. Well, that is what loans are for!
Now, you need to know the types of home loans available and find out which one is the best for you. Given below are the types of home loans available that will help you decide which type of loan is the best for you.
Loans for Purchasing House
This is the most basic form of a loan, using which you can buy a house. You can get this loan from most of the banks and Housing Finance Companies.
Loans For Home Improvement
If you already own a house and need money for repairing it and improving it, then you can apply for this loan.
Loan For Home Construction
Sometimes, people buy land and wish to construct their dream home when they have the money. But, with this loan for home construction, you can start with the construction right away. All that you need is a clear land in your name.
Loans For Home Conversion
If you already own a house and have purchased it using a home loan and now you wish to purchase a new home and move in there, then you can take advantage of this loan. The balance of the existing loan is transferred to the new house and you don’t have to pre-pay the existing loan.
Loans For Purchase Of Land
So you have your eye on a piece of land and wish to buy it! According to the laws, you get only a portion of the home loan for which you are eligible if you are purchasing only the land. It, therefore, makes more sense to buy the land and start construction on it so that you can avail of the entire loan. It is a good investment that you should take advantage of. You never know when the land prices may rise or when the interest rates increase.
This is the type of loan that most people opt for. When you wish to sell your home and need a loan to buy a new house, then you can take advantage of this loan. The loan amount will help you financially to buy the new home till you can sell the old home.
When you have taken a loan for the purchase of a home and the rate of interest on that loan is higher than the current interest rate, then you can get it re-financed. The re-finance will be at the current low rate of interest and the loan burden will decrease considerably.
This is an interesting concept of availing a loan. One would exchange debt for another. One might be benefitted from a reduced rate of interest or repayment in installments. As a result of the recessionary periods, these type of debt-swaps has become truly popular amongst the homeowners.
Though the full form for HELOC is Home Equity Line of Credit, it is an altogether different branch of Home Equity Loan. As discussed earlier, a home equity loan uses the home as collateral; the HELOC involves a concept of the line of credit. This line of credit is basically a “draw period”. This period can be between five to twenty years. The interest charged is adjustable in this case. So one would have to pay back the amount drawn along with the interest. The repayments can be deduced from one’s taxes and hence are gaining fast popularity in the U.S.
Using Collaterals as Mortgage
Mortgages can be various types, but the basic concept behind a mortgage loan is to the user the yet-to-be-bought home as collateral, against which a loan amount would be provided to the individual. In case there is a failure on your part to repay the loan amount, the loan provider will have all the claims over your home. He can then use or sell the home according to his wish. One would be charged interests upon the mortgage loan.
There several individuals who do not meet the prime underwriting guidelines, but are willing to borrow a home loan. The loan provided to these individuals is known as Subprime loans. These types of loans bring in a higher risk for the lenders since the loan would be provided to individuals with a poor credit history or defaulting.
Home Equity Loans
These kinds of loans refer to those loans, where the borrower would have to mortgage the equity of the house, using it as collateral. People often borrow these loans to pay off arrear bills or finance the purchase of a new car. These loans are given in one lump and the rate of interest is adjustable. However, experts would advise one not to avail such a loan, unless the need is too serious and the situation is unavoidable.
These are a few of the types of home loans available from banks and other lending institutions today. You just need to have the right documentation and you can avail the loan. Just don’t forget to compare the current home loan rates of different organizations before you choose one.
Benefits and Pitfalls of Paying Your Home Loan Early
If it was not for the finance companies and banks, many of the current breeds of homeowners wouldn’t have been able to buy themselves a property. The loan facilities provided by these firms has helped to realize the dream of many people. However, paying off the loan through mortgages is a big financial commitment. No one wants to let EMIs eat into a major part of their monthly salaries. Therefore many homeowners are looking to pay off the debt as soon as possible. Here are the benefits and the shortcomings of paying off your debt earlier.
The current trend in home buying is paying off the mortgage early. The spiraling property prices coupled with rising interest rates are making the buyers prefer the early payment of loans.
As per a homeowner, the sooner the loan is paid, the sooner they would be free from the shackles of debt, and the sooner they will be able to use their money for more than just paying monthly mortgages.
Another benefit that serves as a reason for going for prepayment includes the rising interest rates. By paying yearly, you stand to save the tens of thousands of dollars’ worth of interest.
Prepaying the smart way
Prepaying a home loan isn’t an easy thing to do as a considerable amount of money is at stake. Therefore, instead of burdening yourself economically and mentally, you can always go for partial prepayment. Under this arrangement, you can add a little amount to your principal and thereby shorten the length of your loan.
This form of part-prepayment will reduce the outstanding loan amount and the net interest outgo. However, before adding that extra amount to your principal make sure your contractual agreement with the finance company doesn’t read prepayment penalties.
How about refinancing to a shorter-term loan?
If you find your income means increasing, you can always ask the bank to refinance the mortgage to a shorter-term loan. The payments will certainly be higher, but since the interest rates will also below, you won’t experience much of a dent in your income.
A long-term loan, although having low-interest rates, will end up making you a lot poorer than you think. If you are not sure about the effect of a shorter-term mortgage and do not want to take the risk, take out a long-term loan, say 30-years but make payments as if it was a 10-year loan.
Plan the prepayment: You will have to make amendments in your lifestyle for a few years to keep aside additional money. However, these are small sacrifices that you would make in favor of a better future.
What are the perils of prepayment?
There is a huge risk of running your life berserk in a bid to prepay. People who practice prepayment of loans often have to put a brake on their retirement savings. Sometimes the mortgage is accompanied by a fixed percentage prepayment penalty.
Besides, you won’t be able to enjoy the tax breaks that accompany a home loan. Owing to the huge monetary deficit that a prepayment creates, people become woefully under-saved for emergencies and retirement days. The extra money that one pays for prepayment could have been used to make more money or would have been a comfort for one’s retirement days.
Prepayment seriously compromises your financial security and until or unless you have at least six to 12 months of emergency savings, there is no wisdom in going for it. Also, you can look at the interest trends and decide on either investing at higher rates and paying low rates on your mortgage.