Getting a home loan is relatively easy these days more so if you have a pretty good credit history. There are lots of home loan institutions all vying with each other to get the most clients. Some would entice the clients with the promise of fast loan processing while others would offer low interest rates.
If you are planning to get a home loan, you have to have a fair amount of knowledge about the different types of home loans in order to get the best deals in terms of amortization payments and interest rates. Basically, there are four types of home loans- the basic home loan, the standard variable rate loan Cheap interest rates, the equity line of credit loan and the fixed rate loan.
Basic home loan. This is the most ideal type of loan if you are a first time home buyer. This no frills home loan has a variable interest rate which means that if the interest rates fall, you will enjoy a lower amount of minimum repayment. But if the interest rates rise you will be saddled with increased repayment amounts. Basic home loans as the name imply would not give you any special features but being a short term loan it do boast lower interest rates.
Standard variable rate loan. This type of loan has variable interest rates too. Monthly repayments are lowered if interest rates are low. In the same manner, repayment will increase if interest rates rise. However, this type of loan is flexible, meaning; you are given the option to choose between a variable and fixed interest rates. You can also make additional loan payments without being concerned with penalty and portability.
Fixed rate loan. If you have opted for this type of loan, you will have a fixed monthly amount of repayment for 1 to 5 years. This type of loan is most suitable for fixed earners as they will be able to budget the income accordingly. There is one glitch though; as your monthly repayment amount is fixed you will not enjoy a lowered interest rate.
Equity line of credit loan. If you have financial emergencies, or you need a considerable amount to finance a home renovation, you can use your home equity to borrow the urgently needed money. This type of loan requires no fixed repayments. If your home equity is substantial you can even get additional funds without applying for another loan. However, this type of loan is for those who are good in budgeting as non-repayments could at best mean exorbitant interest rate to be paid and at worst could mean being stuck with mortgage payments for ever.