A home loan is an ideal option to buy a home because more often than not, people don’t have the money to make a lump sum payment to buy a home. In these circumstances, a home loan comes in handy and makes up for the shortfall.
These loans are particularly tailored to different home buying needs of the borrowers. Many banks and financial institutions have a home loan division which is their main line of business. They might also necessitate you to undergo a home loan counseling session for ensuring that you find the most appropriate loan that fits your requirements.
Types of home loans
Given below are the different types of home loans to cater to the needs of the borrowers:
Home purchase loans are loans that are used to finance home purchases. These loans are also termed as home mortgage loans. Both fixed rate and variable rate home purchase loans are available in the market.
Home improvement loans are acquired to perform renovation or upgradation to a home. The purpose of securing home improvement loans is to appreciate the market value of the home so that it can be sold at a profitable rate.
Home construction loans are taken out to build or construct buildings or apartments. Both corporate and individual borrowers take out these loans. Real estate companies and builders are the major customers of these loans.
Home extension loans are types of home improvement loans that people use to extend or repair their homes. Borrowers should consult an architect or a structural engineer before performing an extension/repair to their houses.
A home equity loan is a form of loan where the home equity of the borrower is utilized as a collateral against the loan.
Land purchase loans are offered to finance purchasing of a piece of land or parcel of land. You can use a part of this loan to erect a structure on the land as well.
Bridge loans are also known as caveat loans, bridging loans or swing loans. It is a type of short term loan which is obtained for a period that might range from 2 weeks to 3 years, awaiting the approval of a bigger loan amount for a longer term.
A mortgage loan is a type of secured loan which is backed by a real property. Failing to repay the loan might result in confiscation of the property. Similar to other types of loans, these loans also come with an interest rate which might be variable or fixed. Mortgage loans are broadly categorized into fixed rate loans and adjustable or floating rate loans.
Owning your dream home is not always a child’s play. When it comes to purchasing a home with a home loan, you should remember that you have the responsibility to pay off the loan. Securing a manageable interest rate is important since if you don’t receive an affordable rate, you might not be able to pay off the loan.