The loan that is borrowed from a financial institution or an individual to purchase a new house, to renovate the existing house, to purchase a piece of land, or to construct a new house. Home loans consist of fixed or variable interest rates and payment terms. Home loan is a type of secured loan. Home loan is offered against the security of a property or house on which the financial institution is providing funds. The property could be a commercial one or personal one. That’s why a home loan is also referred as a mortgage loan. If a person wants to take a loan to buy a property/house, then the bank issues a loan to him against the security of that property. IF the borrower fails to pay back the loan, then the bank retrieves his money by selling the property.
Types of Home loans
There are different types of home loans available in the market according to the needs of the borrower. Some of them are described below:
Home Purchase Loan
Home purchase loan or new home loan is a basic type of home loan that is offered to borrowers to purchase a new house. Different types of home purchase loans are available with varying interest rates and time period.
Land Purchase Loan
Land purchase loan is offered to purchase a new land for construction and invest purposes.
Home Construction Loan:
A home construction loan is offered to the borrower to construct a new house on his property.
Home Improvement/Extension Loan
When a borrower wants to renovate, repair, or expand his house.
Bridge loan helps the buyer to finance his new home when he wants to sell his existing house and buy a new one. This is usually a short-term loan. It helps borrower a lot during the interim period when the buyer wants to sell his old home and buy a new one.