Introduction to Home loan
The universe of mortgage lending has gotten to the point where there is a place in it for everybody -JOE MAYS
House is an integral part of a person’s phase of life. Housing is a primary human need that comes secondary to food and clothing. Housing is a major expenditure of a capital nature and it is not easily financed by a person’s saving or monthly income. As the price of the property is inflating day-by-day, it is very difficult for a person to choose between financing the basic requirement or to finance a house making. There comes the important role of housing loans.
Real estate is one of the popular investment choices in India. As a house is an asset apart from serving as an asset, it’s a tradition to pass on the house to the next generation. A housing loan is a loan granted or issued by any financial institution under the guidelines of RBI for construction, repairs, up-gradation of a house residential property.
Let’s have a look at it in a much simpler and basic way. Before, the survival was tough as there was a limited amount of income and the basic necessity was only food. But now, the definition of basic necessity has changed it involves house and many other things to support survival. Likewise, in today’s world where there is a lot of competition, it is a difficult job or task to build a house on your own.
It is everyone’s dream to have a small house of their own where they can feel a roof over their head and a ground beneath their feet. Acquiring a house is not for showing off about its possession to anyone but rather it gives a glowing feel to the person in possession. It is like a long term investment which is done once in a life, it provides the person a sense of relief as they have acquired an asset.
The primary concern of a financing company is to determine the loan amount that suits the borrower’s ability to repay it. The most popular method of financing the house is with a mortgage. The home loan is one of the fastest-growing service sectors and it is also enhancing the mass banking field. Banks as a financial service provider aimed at providing financial support from the banking system to the needy for purchasing a home to the resident Indians as well as non-resident Indians. The main emphasis is that every needy person is provided with an opportunity to pursue his dream of acquiring a house with financial support from the banking system at affordable terms and conditions.
Types of housing loans
- Home purchasing loan: This is the loan that one takes for purchasing a home.
- Home improvement loan: This loan provides support in covering the expenses related to repairs of your home or even renovation.
- Home construction loan: This loan arises when the borrower is thinking of constructing a home.
- Land purchase loans: Someone wishing to buy a plot of land for constructing his/her own house can avail of this loan.
- Home extension loan: If you are planning for an addition to be made like another room, garage, bathroom, or kitchen to your home. This is the loan that you should approach for and this also comes in handy if you are planning to have another floor.
- Joint home loan: When two persons simultaneously take loans or want to be as joint borrowers the option is available to them. For example and a family member or any other relative can apply for a joint home loan.
- Home loan balance transfer: This mechanism also provides an option to switch your outstanding loan amount to a different lender with better terms and conditions and lower interest.
- Top-up home loans: This kind of loan helps you borrow some more money above the outstanding loan amount.
Some basic points:
- Principal: The amount of money that is provided by the lender to the borrower is the principal amount of the loan. The principal can be thought of as the primary or basic thing. And the primary thing that a home loan is all about is giving you the money that you need to purchase your home.
- Security: Since typical loans involve a lot of money, the lender needs to have some protection in place so that they are not left high and dry should things go pear-shaped. To do that will require that a certain value of the real property(as a home on a block of land) be used to secure the loan.
- Mortgage: The way the property is provided as a mortgage. It is the name connected with, the security property. That mortgage involves putting an” encumbrance” or “lien” on the title of the property.
- Interest: The amount of money taken as a loan undertakes some amount of money. The interest rate is the means of calculating this interest. Usually, it is expressed as an annual percentage, even though it is typically calculated daily and charged to the loan monthly.
- Variable interest rates: The interest is categorically recognized as fixed or variable. The fixed-rate doesn’t change with the conditions of the environment, but with a variable interest rate, the lender can change the rate as required by economic conditions.
I expect that through this blog I have been able to communicate you all about my views related to home loans, as this blog presents a definable introduction of home loans.