Home Loans - Types of Home Loans
A home equity loan is simply a loan taken out by a bank or such other financial institution to buy a home. Home loans are available to all kinds of people at different stages of their lives. Home loans are usually taken out for building a home, renovations, extension and repairs on the current home, or for purchasing a new home.
Since home loans are popular with both the first time home buyer and the property owner there are many different lenders offering different home loans. Lenders offer home loans in various forms such as secured loans, unsecured loans and line of credit home loans. The type of home loan that is taken out will depend on the needs and requirements of the borrower. Lenders offer home loans in the form of interest only, repayment or flexible rate home loans.
Interest only home loans are where the borrower makes interest only payments. When an interest only home loan is taken out, the borrower will pay interest only on the principal balance which mean the first payment is not the total amount due, but only the interest on that amount. So the borrower only has to pay interest on the principal balance, which reduces the amount of the loan. It is important to remember interest only home loans have variable interest rates, and the monthly repayments vary. This is because the amount that you pay to the lender changes each month.
Some home lenders will allow borrowers to take advantage of introductory interest rates that are lower than the rates offered by other lenders. These introductory rates are only for a limited period of time and then the standard interest rates apply. Borrowers who are planning on buying or selling a home in the future may want to consider whether they qualify for a fixed rate or an adjustable rate mortgage so they know what their payments will be. Both types of loans have advantages and disadvantages and borrowers should compare them thoroughly.
Fixed rate mortgages come with a set rate for the entire life of the loan. Most borrowers prefer this type of mortgage, because it offers a great deal of stability over the long term. In order to qualify for a fixed rate mortgage, you will need to have a decent credit score, a lengthy employment history and be a homeowner. Lenders like to lend money to these customers because they offer a higher level of security.
Adjustable rate mortgages come in two forms, the first type comes with a fixed rate for a certain period of time and the second type comes with a flexible rate for a variety of different periods. These flexible loans are the preferred loans for homeowners who wish to borrow more money and stretch their mortgage payments over a longer period of time. Homeowners who qualify for Adjustable Rate Mortgages will enjoy some of the benefits of owning a home such as low monthly payments, tax deductibles, home insurance and most important of all low interest rates. However, there are some disadvantages of Adjustable Rate Mortgages as well such as a risk of sky rocketing home prices if interest rates go up. Borrowers should get expert advice before applying for either type of loan so that they make the best decision for them and their family. Get in touch with Ascend Mortgage about this service.
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