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Which One Is Better: Mortgage Loan or Home Loan?(1)

by  | Corporate
Posted:     Updated: Jan 28, 2019  23:44 ET
 
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A mortgage loan is a type of agreement through which a borrower can utilize his/her property as collateral to receive a loan. To obtain this loan, a person can also mortgage gold, insurance, property, vehicle, FD etc. in a bank. On the other hand, a home loan is taken to purchase, renovate, or construct a home. In most of the cases, a lender has a right of foreclosure if a borrower fails to repay a loan amount.


1. Types of mortgage

There are different types of mortgages designed according to different needs and situations of people. You can choose among them as per your specific needs and goals.

  • Fixed rate
    In a fixed rate mortgage, the monthly payment and interest rate remain the same for the entire period of a loan. These types of loans are fixed for approximately 15 to 30 years.
  • Adjustable rate
    In this loan, the interest rate is fixed for a certain period of time and afterward, it starts changing. This change affects the monthly payment which goes higher at the time of high rates and gets down while the rates are low.
  • Reverse mortgage
    A reverse mortgage is designed for senior citizens through which they can utilize the equity or real property value of their home to get a loan. They can postpone loan payment until they leave or sell a home or die. However, a borrower is still liable to pay property taxes as well as homeowner's insurance.
  • Interest only loans
    In such loans, you only need to pay the interest cost of a mortgage every month. Without paying a real debt, the monthly payment decreases and you can wait for building equity of your home. However, a person is required to repay this loan some day. They can give only short-term benefits and are not considered to be a great option for homeowners hoping to increase their wealth.
  • Balloon loans
    Here, a mortgage can be paid off with a large payment. Instead of making small payments for fifteen to thirty years, a person can pay-off an entire debt through a big amount after five to seven years. Such loans are better for temporary financing.

Take the help of some reputed mortgage home loan company, that provides such loans. Their mortgage loan specialists have long years of experience and knowledge in this field and provide you with the best deal as per your needs and goals.


2. Types of home loan

A home loan is provided on interest to purchase, renovate or build a home. This loan has the lowest interest rates in comparison to most of the other loans. Here, a property is used as collateral for a loan, and a financial entity can liquidate property in case of a borrower's default.

The main types of a home loan are:

  • House-purchase
    This loan is used to purchase a residential property. A borrower can purchase resale or builder allocated property. Their interest rates can be hybrid, fixed or floating.
  • Plot-purchase
    A plot purchase loan is given to buy a plot on which a borrower wishes to build a house in the future. A person can also retain it as an investment.
  • Home-construction
    A home-construction loan is provided to construct a house on a plot. In case the plot price is not included in a loan, the estimated construction cost of a house is taken into consideration.
  • Home improvement
    The home improvement loan is used for a renovation purpose of a house. This loan is the best option for persons who wish to repair their house but lack the necessary funds.

In addition to these, there are also other types of home loans- flexible rate, fixed rate, investment, low deposit, guarantor, low doc home, a line of credit, etc.

In most cases, the interest rates of a home loan are lower than mortgage loans. This makes a home loan a more affordable option than others. Where in mortgage, the property is used as collateral, a home loan may or may not have this requirement. Most people do not wish to have a mortgage loan as there is risk involved to a borrower's assets in case of default. There is also no tax advantage to salaried persons at the time of payment.

Whereas, the government supported home loans such as VA can be obtained at low-interest rates and with low down payments. Such loans are backed by the federal government in case of a borrower's default. These are some of the reasons that a home loan is a preferable choice over a mortgage loan. However, persons can still choose among them as per their specific needs and goals.

In most of cases, home loans have low interest rates in comparison to mortgage loans. This makes it an affordable option for people. Where in a mortgage, a property worked as a collateral, a home loan may or may not have this requirement. Many people do not wish to have a mortgage loan as there is risk involved to a borrower's assets in case of default. There is also no tax advantage to salaried persons while making a payment.

Topics: Commercial lending | Commercial other
More by: Mortgage Miracles Happen

 

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Which One Is Better: Mortgage Loan or Home Loan?(1)

by Mortgage Miracles Happen | Corporate
Posted: Jan 28, 2019  23:44 ET    Updated: Jan 28, 2019  23:44 ET

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