Home Loans: What You Need To Know
Before venturing into discussing some of the things that you need to consider doing or following up on when getting a home loan, it is important that you, first of all, understand this type of loan. The first thing to note is that home loans are, somewhat, a bit different from mortgage loans. And here is why! Home loans are given for the restricted end use of purchasing property, and the money can only be paid directly to the seller or buyer of the property. Mortgage loans, on the other hand, are given for open end use and are given against a property’s lien and are paid directly to the borrower to use as he/she deems fit. Under mortgage loans, the end use is not monitored. Under both options, the borrower’s property is mortgaged to the entity or institution lending them the money.
As a person looking to get a home loan for whatever reason, it is advisable that you consider a couple of things to ensure that you make the most informed decision and that you have an easy time applying for, and getting one. Be it you are a first time home buyer, or are purchasing an investment property, or are refinancing a home loan, trying to compare and understand information related to these loans can be confusing and quite frustrating. To help ease things for you, here are a couple of the main things you need to know and consider before applying for a home loan.
Before applying for a home loan, it is advisable that you take the time to consider how much you want as a loan. No one knows what is best for you except you. As such, taking the time to work out the amount you want is one of the most important steps towards owning a home. Therefore, consider how much or how little you can comfortably afford. The amount you get will dictate the mortgage repayments you will be making. As such, it is advisable that you do not borrow an amount that you cannot afford to pay off on a regular basis.
Purpose of the Loan
When thinking of getting a home loan, it is important that you establish why you need one. By answering this question, you will be able to know the kind and size of the loan to get. Why is it important that you do this? The reason is because there are certain loan features that you may be in need of, depending on the desired loan’s purpose, and understanding your needs could make it easier to identify particular lenders who could facilitate your needs. What is the purpose of your loan? To purchase an investment property? To purchase a property you will live in? Is it as a reverse mortgage? Or is it as a line of credit?
There are many different types of home loans out in the market, and this means that there are a lot of things that you should consider. Finding the perfect home loan is more than just finding the cheapest home loan rates, though this could play a major role in the decision you make at the end, but it is about getting a loan that has all the right features. When considering different home loan options, consider if they offer things like redraw facility, lump sum repayments, additional repayments, mortgage offset, mortgage portability, split option, and interest only amongst others.
By considering the above things, and others, when looking for a home loan, finding and choosing the perfect loan that will suit your needs and refinancing options will be much easier. It is, therefore, advisable that you take the time to do some extra research on these and other things before making any decision.
Post by Mike Reed, The Mortgage Calculator.