It can really be overwhelming for anyone who plans to buy a property, most especially if it is your first time. It is crucial to know all the available loan options before deciding to make a purchase.
As the years go by, the demand for home loans is continuously increasing. So nowadays, there are different types of home loans that are being offered by banks and lenders. These home loans can cater to many people, however, it is required to thoroughly understand the loan options available in accordance with your needs.
This type of home loan allows you to be more flexible with your payments. Some financial institutions may allow you to make additional payments. They can also let you withdraw some of the money you have already paid in case the situation calls for it. It will make it easier for you if ever you spot a better deal and decide to proceed on that loan.
As the name implies, a fixed rate allows you for a given period of time to lock-in your interest rate. In a way, it can be helpful for you to stay on track of your budget. It gives you security on your repayments and from the possible rate charges. The fact wherein the interest charge on your home loan is fixed the entire lock-in period is one of the best features of this type of loan. It doesn’t even matter if the interest rate fluctuates or changes in the market.
This loan is a combination of a variable and a fixed loan rate referring to your mortgage. In a split home loan, it allows you to split your home loan to multiple accounts. As for them to be in separate accounts, their interest rate is also charged separately in accordance with the loan.
This type of loan allows you to pay only the interest cost temporarily, which usually takes from five up to ten years. During that interest-only period, you are not required to pay your loan balance. However, when the period ends, your home loan will recur over the remaining term of your principal and interest home loan.
This type of loan is acknowledged if you lack financial requirements or the needed collateral. It is the use of a ‘third party,’ primarily your parents or close relatives, with the agreement to use some of the equity in their own property to secure your home loan.
The term Low doc loan is short for Low ‘documentation’ loan. The purpose of this type of loan is generally for those who lack the required documents. It targets freelancers, self-employed, or new immigrants who don’t have the needed papers such as payslips or income tax returns, to avail of the other type of loans. However, this type of loan usually entails a significantly higher interest rate.
Unlike most banks and private financial institutions that require a huge deposit, this type of loan will help you get your own home with just a minimal amount of deposit. It is ideal for those who are on the struggle for their living expenses as it will depend on your financial status.
It is also known as HELOC. A Home equity line of credit is specifically different from home equity loan as the former is a revolving credit with a flexible interest rate. This type of loan allows you to make use of their loan for something else such as for education, or medical bills. The equity of your property will be used to determine the allowable amount for your collateral. You can either pay as a lump-sum or follow the loan amortization schedule.
A non-conforming loan is intended for those who don’t fit the banks usual lending criteria. It is also for those who have a bad credit history or those who have been unemployed for quite a while. However, this type of home loan requires a higher interest rate as compared to other types of home loans.
This type of loan is for short-term only, as it will be the one to finance your new property while your existing property is for sale. It also allows you to live in your current property while your new home is still under construction. The certain period of selling your existing property generally demands six months. On the other hand, a new property that is under construction must only take twelve months.
As mentioned above, there are various types of home loans to choose from. So now that you already have an idea of what are they and who are they intended to, we suppose that this can help you understand and decide which type of home loan is best for you.
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