The reason it is easy to get a home loan also known as a mortgage is because the home itself is being offered as collateral. You can get a low interest rate on a home loan for that simple fact. Loans given against collateral will get you a lower interest rate. Banks have the assurance of collecting on their loan if you don't pay. The lein against the home is a claim against the property and the loan has to be paid in full before you can eliminate the lein against the property. If you don't pay the loan in full, then when you go to sell the home, the balance of the lein is taken out first and given to the first lein holder, usually the bank or finance company. After the balance is paid to the lein holder, then the rest of the money is yours unless you have other leins against your home. Secured home loans can come in a variety of packages including: Fixed Loans Variable Loans Capped Discounted A fixed loan means the interest rate on your home loan is "fixed". The rate will not go up or down during the term of the loan. A variable loan means your interest rate will fluxuate. If the prime rate is up, your interest rate goes up. If the prime rate is down, your interest rate will go down. Variable loans are bit scary because you never know what the interest rate may do and it can change your home payment by a few dollars or a few hundred dollars. A capped rate mortgage means there will be a ceiling on just how how your interest rate can go. This si to protect you in case interest rates go sky high. Your capped rate will only reach the ceiling amount and go no higher even if the interest rates go much higher. A discounted rate loan means that your variable rate is based on a discounted rate at a certain level below the variable rate for a specified amount of time. Secured home loans can provide you with emergency cash or other cash needs you have. The loan can be used a variety of ways including: 1. Debt consolidation 2. Education 3. Medical bills 4. New car 5. Vacation 6. Misc The more equity you have in a home, the more you can borrow. Even if your credit is not A+, you can still get a loan when you have equity in your home and if you can prove you have the ability to pay back the loan. Remember that getting a secured home loan will affect your budget, maybe your taxes, and insurance. Have all the questions you need answered ready for your loan officer. Be sure to get an itemized list of ALL the fees that will be due with getting the loan, the interest rate you will be paying, the length of the loan, and if there are any early payoff penalties. You don't want to get penalized for paying your loan off early. (Some of these fees apply because the finance company loses interest money if you pay your loan off early) Check about insurance in case you get disabled or lose your job. This insurance can make your loan payments if you qualify. The rules are much different for the self-employed, so be sure to ask about that before you buy insurance for a loan. |
