A home loan () or equity loan () usually refers to money borrowed from a bank or company from which an individual lends money. The borrower must repay the loan amount in easy monthly payments or interest on the EMI over a period that can range from 10 to 30 years, depending on the nature of the loan.
What is a Home loan?
As the name implies, a mortgage loan is an amount of money an individual borrows from a bank or financial institution to buy a home or commercial property. The individual must then repay the loan with a simple monthly installment (EMI) at a certain mortgage loan interest rate for the borrower.
Mortgage loans are money lent by banks or other lenders to private borrowers to finance the purchase of real estate. The borrower and the borrower will agree on a period of time in which the loan must be repaid. Typically, this period is between 25 and 30 years. The borrower and borrower will also agree on a repayment schedule, which is usually two weeks or a month, but can vary.
The borrower usually has to pay interest in addition to the principal (the loan amount itself). The type of interest outstanding is determined by the borrower’s and borrower’s agreement, and there are different types of interest, including fixed and variable interest rates, which will be discussed in more detail below.
Mortgage loans are usually secured against the value of the property itself. This means that if the borrower is insolvent or unable to repay the loan, the borrower may be forced to sell the property to pay off the debt.
What is the difference between a Home loan and an equity loan?
I think the terms “mortgage loan” and “mortgage” are often compatible, but are there any differences? Yes, there is a difference between the two, and it may look only semantically, but it is important to clarify the difference.
The term “mortgage loan” refers to money that someone borrows to buy real estate. However, the term “mortgage” specifically refers to the contract between the borrower and the borrower that uses the property as collateral for the loan.
Simply put, mortgages exist to protect borrowers from default. If a borrower (mortgage lender) defaults on a mortgage loan, the borrower (mortgage lender) has the right to sell the property secured by the loan to repay the balance of the loan.
What are the benefits of Home loans?
When you choose a mortgage loan, you can take advantage of:
Taxation: Mortgage loans allow you to claim income deductions for interest and principal owed. Under the Income Tax Act of 1961, under Section 80C, you can claim up to 1.5 lakh for principal repayment and up to 2 lakh for interest repayment under Section 24B. Other tax credits are also available through Homeron.
Interest Rate: The interest rate on mortgage loans is relatively low compared to different types of loans. In addition, you can apply for an additional loan in addition to your existing home loan in case financing is denied.
Watch a live preview. When you apply for a home loan, the bank checks the property from a legal standpoint and confirms that the documents are valid and the title is clear. This step prevents fraud and allows you to verify your assets after you’ve gone through the proper due diligence.
What is a fixed-rate Home loan?
A fixed-rate loan is a loan in which the interest rate is set or “fixed” for a certain period of time, usually one to five years. This means that no matter how the interest rate changes over the life of the loan, the repayment will remain the same and will not rise, fall or fall.
The main advantage of a fixed-rate loan is the certainty that the monthly repayment will be the same even if the interest rate goes up. The main disadvantage is that fixed-rate loans are often less functional than variable-rate loans and are usually limited in their ability to repay additional payments.
Similarly, if you decide to sell your property or refinance your loan before the deadline, your lender will likely charge you a break fee. You can learn more about the potential costs of terminating a fixed-rate loan.
What is a variable-rate Home loan?
A variable-rate mortgage loan is a loan without a set interest rate. Instead, depending on the term of the loan, the rise and fall depends on the cash interest rate. The advantage of variable-rate home loans is that they can have many features, such as buy-back loans, the use of offsetting accounts to lower interest payments, and the ability to pay off additional payments without penalties. Generally, there are no fees associated with variable-rate loans, but other fees may apply.
The main disadvantage of variable rate loans is that the minimum required payment may be raised. If you want to know exactly how much you will pay each month, this may not be desirable.