Different Types of Home Loans – Find the Best Loan for Your Needs

This fixed rate home loan is a type of loan where the interest rate is steady, that is, it does not fluctuate during the specific period of the loan. This is a comfortable option as it lets the borrower know exactly how much is to be paid each month and one gets the added benefit of tax deduction too. Demand for this loan has seen an increase during the past decade. But, having some knowledge on the different types of loan can help you to make a sensible choice.

Fixed rate home loans

Fixed rate home loans

#1 Home Purchase Loans:

These home purchase loans are apt for those looking to buy either a new home or probably a home from the previous owner. Lenders, in this type of loans, tend to finance almost 85% of the market value of a home. You can choose between the floating or the fixed interest rates when you opt for this loan. You can get these loans easily from financial institutions and banks.

#2 Land Purchase Loans:

The above-mentioned loans are taken specifically to buy a plot where you wish to construct a home. With this loan, you can look forward to getting 85% of the land price from banks. This purchase of land can also be used for investment besides residential purposes.

#3 Home Construction Loans:

Those who wish to construct a home instead of buying a readymade one can opt for this loan. The process of applying for this loan is a little different from rest of the housing loans available. The piece of land on which the house is to be constructed needs to be bought within the year so that the cost of the land can be included in the cost of the home for calculating the loan. You can get this loan either in a single installment or in several smaller installments. And, this decision is taken by the lender.

#4 The Many Benefits of Fixed Rate Home Loans:

As we know, fixed-rate home loans have their interest fixed at the time of taking the loan. Besides having this advantage of paying a specific amount every month, you have the freedom to choose from the variants available with this loan like 2 years, 3 years or even 10 years. Most of the borrowers prefer this fixed rate home loan as compared to the floating loans, as this provides the certainty most of us are looking for. You must have the knowledge of how much is to be paid every month and should also be sure of the loan getting over a specific time.

Fixed rate home loans

Fixed rate home loans

#5 When to opt for A Fixed Rate Home Loan:

You can think of opting for this fixed rate home loan if:

  1. You are able to perceive interest rates to rise anytime in the future and thus would like to lock the loan at a fixed rate.
  2. You find it convenient to pay the required EMI every month. This should work out from 25 to 30%.
  3. You find that the interest rates have taken a dip at present and you are comfortable with the rates.

#6 Making A Choice:

If you are not too sure of the right choice between the floating home loan and the fixed home loan you can think of opting for a combination of both, floating and fixed. This works well for those who are already making payments on other loans also. You can opt for the floating loan initially and then get this changed into the fixed rate home loan. The best way to go about this is to seek help from professionals who have the required knowledge and understanding of the working of these loans.

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