Home Loan Basics: Getting Started – A Step-by-Step Guide
It has become common for a person to own a home as well as take a loan to finance the same. Whether you are a first time home buyer or a regular borrower, you might have questions regarding the loan or the terms and conditions which you signed when applying for the home loaan.
There are so many misconceptions among the people regarding the home loaan that it becomes very difficult for them to apply for a home loan without understanding the basics.
Here is a guide for you to understand the basic and crucial information that you need to know while taking a home loaan.
What is the difference between home loans and personal loans?
The home loaan can be termed as a personal loan, since it helps you to buy a house of your own. The rate of interest of the personal loan is generally lower than the rate of interest of the home loan. If the rate of interest of a home loan is low, it means you will be paying a higher amount of money to the lender.
The basic idea behind the home loaan is to enable you to build a safe and secured house. The lender will provide a loan for the same amount, which you will be repaying for many years. You need to pay a monthly interest on the loan, and as per the repayment period, the lender will be taking a portion of the amount.
What are the types of home loans?
There are three major types of home loans available, which include conventional home loaans, HFC home loans and floating rate mortgages.
What is the difference between the conventional home loaan and the floating rate mortgage?
This is the easiest type of home loaan to understand, as it has the most basic structure. If you are planning to buy a house for the first time, then you can choose this type of home loan, as it is the easiest to apply for.
The conventional home loaan is considered the most flexible, because it has no fixed rates. The interest rate will vary with the prevailing market prices of the housing stock. The main difference between the conventional home loaan and the floating rate home loan is that in the conventional home loan, you will have a fixed term, whereas in the floating rate home loan, you will be paying interest on the entire sum you have borrowed for the loan.
What is the difference between the fixed rate home loaan and the floating rate mortgage?
This type of home loaan is the simplest and best. In this type of loan, you will be given a certain amount of money which you will be paying for the entire duration of the loan, but the interest rate will not be fixed. You will be paying interest on the entire amount that is borrowed.
What is the difference between the personal loan and the mortgage?
A personal loan is not a type of home loaan. This type of loan is available for a small sum of money which is used to settle a personal debt.
So, in short, a home loan is a personal loan that is used to buy a house.
Home loan interest rates:
Interest rate is the amount of money that you pay every month for a home loaan, and it varies from lender to lender. You need to look for the lender that will provide you the lowest rates and make you happy. There are a lot of lenders that provide loans at different rates.
Types of loans:
There are two types of loans. One of them is a Fixed Rate Home Loan, and the other one is a variable rate. Both have their own benefits and you have to choose the right one according to your requirement. In case if you are planning to start a new life then the variable rate is the best option for you.
As you have understood the difference between home loans