Loan options refer to different types of loan programs. In the United States, there are various loan options available for the borrowers. After the recent housing market dilemma in the country, the lenders have become more stringent regarding their mortgage lending guidelines. This is due to the reason that banks and other financial institutions lent a huge amount of money liberally to borrowers who were incapable of paying off the loans on time and ended up losing their homes to foreclosure.
What are the loan options?
Given below are the different types of loan options:
Mortgage refinance is the procedure of taking a new loan with more affordable rates and terms to pay off the existing mortgage loan. Homebuyers often go for refinancing whenever they face difficulties to keep up with their monthly mortgage payments. The security or collateral for the new loan is the same which was used to secure the first loan.
Mortgage Home Loans
Mortgage home loans or mortgage loans or simply mortgage loans are loans that are used to finance purchasing of homes. The home that you buy works as a security or collateral against the loan you have taken out. In case of a payment default, the lender has the legitimate right to seize and sell off your home to recover their money. These are secured loans, mostly used for buying homes.
Mortgage rates are interest rates payable for obtaining mortgage loans. There are basically two types of mortgage rates – adjustable and fixed. Adjustable rates vary according to a number of indices linked to the market rates. Fixed rate mortgages come with an interest rate that remains unchanged throughout the entire duration of the loan.
Home Equity Loans & Lines of Credit
A home equity loan is a type of loan where the borrower utilizes his home equity as a collateral.
Home equity lines of credit (HELOCs) are loans where the lender accepts to offer a particular amount of money for a certain period (known as a term), where the security or collateral is the home equity of the borrower.
The basic difference between a home equity line of credit and a home equity loan is that a home equity loan comes with a fixed interest rate and the home equity line of credit carries an adjustable interest rate and is a type of revolving credit.
What is home equity?
Home equity refers to the market value of the unencumbered interest in the borrower’s real estate, i.e., the variation between the fair market price of the home and the outstanding balance of the liens on the home. Home equity goes up when debtor is making payments for the loan balance and/or if the home value rises.
FHA loans are types of federal assistance home loans that are backed by the Federal Housing Administration in the U.S. Federally eligible lenders might issue these loans.
Debt Consolidation Loans
A debt consolidation loan is a big loan which is taken out to pay off a number of smaller loans.
A reverse mortgage is a special type of mortgage loan which is offered to the seniors in the US. The home equity is allowed to be converted into cash flow.
Personal loans or consumer credits are loans offered to finance personal needs such as buying a car, paying for college education, going for a holiday tour or home renovation.
Mortgage Loan Modification
Mortgage loan modification is a program where the terms and conditions of a loan are modified or relaxed to make it easy for the borrower to pay it off. Usually, interest rates are reduced or switched and loan terms are extended.