Home Interest Loans
A loan is a basic financial tool that is used as a source of capital to start a business or for personal use. A home loan falls under the category of a personal loan. A home loan is also referred to as a mortgage. A home alone can either be secured or unsecured. A secured mortgage is one that is secured by the equity value of the borrowers’ place of residence. Meaning, failure to pay can result into the bank or financial institution repossessing your residence or selling it in order to compensate for their money. An unsecured home on the other hand refers to a home purchased without having to necessarily secure it with personal property. They are mostly for property that is of low value. Failure to pay in this case can lead to a case in court. These types of loan derive their definition from the kind of interest rate charged. Before you take a home loan, consider factors like if your investment is worth it, after how long you want to repay it, impact of the loan on your family and your income and the interest on home loan.
History
The only way to obtain money to buy a home for many years are was applying for a conservative home loan. This was obtained from a bank or financial institution. In 1938, the Federal National Mortgage Association was produced and recognized as a federal agency. This agency made it possible for people to get homes even if they did not have an income. In 1970, the Federal Home Loan Mortgage Corporation was created in order to reduce enjoyment of home lending. When World War II erupted, most citizens joined the war. When they came back home, they needed somewhere to live. They needed to borrow money to purchase or build homes. All these agencies and corporations later allowed people to own homes. They however provided protection for the loans together with those involved with them.
Features
Maximum loan
80% of the value of the property and not on the basis of repayment ability of the customer.
Maximum Term
20 years focusing on your age of retirement.
Loan Applicant and Co- Applicant
A Home Loan can either be applied for jointly or individually. The co-applicants are required to be co-owners.
Adjustable Rate
Interest rate on the home loan is revised after every 3 months. They calculate from the date they made their first disbursement.
Let's take an Example:
Mr. Y takes a floating rate home loan from national Bank of Rs. 25 lakhs for 20yrs.
For the first l year the interest rate will be between 9.5% - 10% for the first 4 months of the 2nd year, If he chooses to change the EMI, he is going to spend more when the interest rate increase and will save more when the interest rate decreases.
In fixed rates,
The interest on home loan does not change. It remains as it was throughout the loan period.
For example,
Mr. X as a taken home loan from ABC Bank of Rs. 25 lakhs for 20ys. At an interest rate of 11.50% pa.
Then his EMI will be Rs. 26661 which he needs to pay for entire term of loan that is 20 years
Conclusion
Interest rates for home loan depends on the amount you borrow. For one to be issued mortgage by a bank or financial institution, several factors must first be looked into. Such factors are income, property value, credit rating and expenses. Down payment is also considered. All these factors greatly influence the terms the borrower is going to get from his financer. It is for this reason that a borrower is advised to assess his financial position prior to acquiring a mortgage. If he fails to do so, he can get terms that are unfavourable.When choosing mortgage, do not just look at the interest rate, also look at the redraw facility, additional repayments, repayment holiday and parental leave.
