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Various Characteristics of Home Loan and Mortgage Loan
A home loan or a home mortgage loan is any loan which has a property attached to it as collateral. A builder, developer or a home buyer can take financial assistance in the form of a loan for purchase of a given piece of land of a completely built structure. In laymans language mortgage is tantamount to a mortgage loan. A home mortgage loan has characteristic like most other loans in that the method of repayment, interest rate, maturity period and size may vary to some degree on a case by case basis.
In contemporary times, most home purchases are done with the help of a home loan with few exceptions as very few households can muster enough money to purchase a property outright. In geographies where the demand for property is high, there is an equally strong domestic for home loans.
The word Mortgage is lifted from a French term which means “dead pledge”. This implies that if the obligation is left unfulfilled then the property would be taken into foreclosure.
There are many different types of loan which are disbursed worldwide. But there are several factors which broadly defines the feature of any mortgage. These characteristics and features are subjected to legal and local regulation of the land. Lets look at some of the broad characteristics of a loan.
Prepayment: a few types of mortgages completely restrict or limit prepayment of a portion or the entire loan. In certain cases even a penalty is imposed on the lender in lieu of prepayment. EMI: it is the amount which has to be paid on a regular basis as decided between the lender and the borrower. The amount can be altered by the lender or by the borrower as per their mutual understanding.
Term: home loans typically have a maximum term. This is the number of years after which a loan has to be repaid. Some of the loan has no amortization or some of the loans require repayment or even still negative amortization.
Interest: Interests are of 2 types, fixed and variable. These may or may not change at pre-defined periods. Depending upon the financial health of the country the interest rates of a home loan could be high or low.
In a fixed rate home loan, the periodic payment as well as interest rate are fixed fir the entire life of the mortgage. In an adjustable rate home loan, the interest rate fluctuates after a given period of time in accordance with some market index.
Building Credit for a Home Loan
Building credit for a home loan takes a bit more of a focused plan than financial improvement for other goals. If you’re looking to apply for a mortgage you want to have a detailed plan, with a time line and small goals marked along the way. This focus doesn’t mean this has to be difficult, even for the worst financial history, in fact, having this plan will really simplify things and take the worry out of your hopes and dreams of owning real estate.
The first thing you need to do is get a copy of your credit report. This is where your score comes from, so anything you need to work on is listed there. When you look at at this page you first want to look it over for mistakes. Just because you have made past mistakes doesn’t mean the companies haven’t, too. Common mistakes include them marking accounts as overdue or even just open that are currently paid or closed; they’ll also often mark your credit limit as lower than it really is on some of your cards. One of the factors in calculating your score is the amount of credit available to you versus the amount you actually use.
There are two types of payments that make up your financial history, revolving (credit cards) and installment (loans). You want to make sure you have a good history built up with both of these types of payments to get a home loan. If you don’t have much of a history with loans you’ll want to consider getting a small loan for a car or other use and be sure to make the payments in full each month. You’ll want this to be small and take approximately a year to pay off. This will show you can handle making payments and paying something off in full.
The most important thing to keep in mind when building credit for a home loan is to make sure you make all of your payments on time and check your report at least once a year, if not more often.