Home loans are loans in which homes are used as collateral in order to reduce the risk of the lender. Since they are lower risk loans, home loan rates stand at lower amounts compared to unsecured loans. There are several types of home loans; equity home loans, equity lines of credits and mortgages. Mortgages (transfer of an interest in property to the lender, as a security for loans) and home loans pay off quicker in comparison to equity line credits on homes. Home loan rates differ due to various factors. Some home loan rates are fixed during the entire period of the loan (the period can differ from as short as one year to as long as 3o years) and some home loan rates are adjustable. Specific indices such as the interest rates for Treasury bills of the United States, decide on the adjustable home loan rates. In England, it is the London Inter-bank that offers rates.
When deciding on the home loan, it is important to consider which type of loans will be better suiting for your financial status and requirements. Usually conventional mortgages require a ten percent down payment. In other words, only ninety percent of the value of the home will be considered. Typically, home equity loans and home equity line credits will only allow you to mortgage eighty percent of the home’s value. However, some lenders let you burrow as much as a hundred-and-twenty-five percent (125%) of the home’s value. Rough estimations of national home loan rates (January 2010) are as follows. This will give a burrower and idea as to where he/she stands.15 year fixed – 4.6%, 30 year fixed – 5.3%, 1 year ARM – 3.3%, 5/1 year ARM – 3.7%. These home loan rates are subjected to variations. One must identify his or her limits when applying for home loans.
Home loans benefit people, for they enable one to buy a home they can’t afford to pay upfront. So with a home loan of suitable home loan rates, one can buy a Victorian cottage by the country-side rather than settling for a tiny apartment in the noisy city. Equity loans and home equity line credits allow you, the burrower, to access the equity you have built up at home (this includes renovations, modifications and additions to the house). After you do apply for a suitable loan with bearable home loan rates, you must keep in mind that whenever you fail to pay an installment the lender can foreclose your home.