HOME SWEET HOME
A Primer On Home Mortgage Loans
Home is where the heart is, as many people say. Unfortunately, we need a physical home just as much as our hearts would need our physical bodies to survive. With the rising cost of living, owning a home isnt really what we could call as easy. Buying a house would most definitely put a huge dent on our budget, and this might result in our failure to meet the other demands of our financial life.
Hence, for a lot of people, renting a home has been a more practical option. After all, you would just have to worry about the monthly fees, which are not as steep as the lump sum required for the purchase of a house.
Right?
Buying Vs. Renting
Sadly, such is a common misconception. A lot of people do not seem to realize the fact that renting a home is tantamount to paying a 100% interest.
Look at it this way. We live in a rented house, dutifully paying the landlord the applicable fees every month. At the end of the lease agreement, would we have equity over the house? No, Sirs and Maams. The landlord would get to keep everything! All the rent we have paid all those years would be for naught, as not a portion of it was allotted for our ownership over the said home.
Under this light, youd actually be paying a 100% interest indeed, as not a single cent the rent you have paid will not benefit you in the end.
Home Mortgage Loan As A Better Option
Home mortgage loans would prove an excellent alternative for people who do realize what they stand to lose with renting a house. Home mortgage loans are loans extended to people who buy houses, with the deed to the latter being the collateral to secure the said loans.
The debtor would just have to pay the down payment for the house. The balance would then be paid by the creditor. This balance would thereafter be paid by the debtor in stated installments. Pending full satisfaction of the loan, the creditor would get to keep the deed of the house as security.
The best thing about a home mortgage loan is that you could actually use the house even while the said loan is ongoing. You could live in it, rearrange the furniture, change the paint job you could do anything with the house except alienating it for whatever purpose until such time that full ownership is transferred to you.
How To Apply For A Home Mortgage Loan
Most lending institutions these days offer home mortgage loan packages. They come in a variety of applicable interest rates, and its just a matter of choosing the most favorable one for your needs. These home mortgage loans also come with different maturity periods, and its also a matter of choosing the right one or your financial abilities. Be wary about home mortgage loans spread throughout a long period, however. Though initially this setup may prove to be the most convenient, youll end up paying more in the long run, by virtue of the interests that are attached.
Lending institutions wont grant you a home mortgage loan automatically. They would look into your credit history, your gross monthly income, and your debt-to-income ratio before deciding if youre worthy of the loan. Having low marks on the foregoing would make them consider you as a high risk investment, and this would greatly affect your chances of being granted the loan. If ever the loan is granted, it would surely come with a higher interest.
Also, you would have to pay at least a 20% down payment as this would eliminate the obligation to pay the private mortgage insurance which can be quite costly.
Tags: Finances