A home loan sometimes known as a house loan or mortgage, is money loaned by financial institution to a borrower to allow them to purchase a home or investment property. The money is repaid with additional payments in the form of interest over a number of years. There are usually many fees associated with home loans loans including establishment fees, ongoing monthly service fee, switching fees, early repayment fees, discharging mortgage fees and redraw fees only to name a few.
Home Equity Loans
Home Equity Loans or home equity line of credit usually requires the borrower to use their home as collateral for the loan. Some home equity loans feature an option for an approved line of credit allowing the borrower to draw funds as required. When shopping for a home equity loan many borrowers should seek the help of a finacial professional when comparing any loan or when trying to establish if there is a benifit of choosing home equity loan against a conventional home loan.
A Home Equity Loan or a Home Equity Line of Credit, is received as a lump sum in the borrower's account. Depending on the conditions of the loan principle repayments may not be required, although interest payments and account service fees are sometimes deducted on a monthly or quarterly basis. Line of Credit provides the borrower a revolving credit line, much like a credit card or overdraft. There are always risks associated with Home Equity Loans because the home has been used as collateral for the loan.
Because Home Equity loans allow relatively easy access to cash, it is quite easy for some people to spend this money more freely. Some Home Equity Loans feature a final (balloon) payment so there is the danger that the borrower will borrow more money to pay off this outstanding debt. This may put the home in jeopardy if the borrower fails to qualify for refinancing. These are all just but a few of the reasons that you should seek professional advice.
Home Loans - Possible Questions To Ask
- What support documentation do I require for the home loan application?
- What type of home loan would best suit my needs?
- Are home equity loans available from this insitution? If so what is the home equity loan lowest rate?
- Is there set up fee or an establishment fee?
- Are there ongoing service fees or charges?
- Can I make additional repayments on my home loan and what are the penalties if I want to make additional repayments?
- Can I pay the home loan out at any time?
- What is the interest rate for home loans?
- What is the term of the home loan?
- Are redraw facilities, available and what are the fees?
- I have quotes from other banking centers/financial institutions, can you give a competitive quote to win my business?
- Sit down with a lender or professional financial planner and seek advice. Discuss your financial situation and the type of loan you are seeking, establish if extra payments over and above the minimum repayment balance required will aid you to save money over a period of time.
- If making extra repayments, ask your lender or professional financial planner if extra repayments on a weekly basis will reduce the term of your home loan further.
- Do your homework. Know and understand what is on offer at other financial institutions as this might be your bargaining power. This will also show that you will be prepared to take your business elsewhere and not just settling because the banking center or lender is close to your place of work or home.
- Possibly ask your lender to review the loan as often as your contract will allow. New products enter the market all the time so there may be a new product that will better suit your needs.
- Unless you can control your spending habits and are excellent at saving money, consider asking about the advantages of a Home Loan redraw facility.
- If you are not disciplined in budgeting beware of the pitfalls of a revolving line of credit (Home Equity Line of Credit). Funds are usually easy to access with revolving line of credit accounts via a keycard and can potentially lead to financial problems if their user does not track and budget for their financial situation wisely.
- Always seek professional advise as there are far more considerations than the general ones listed here.
- Research and compare mortgage lending on the internet.
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