Home Loans have always been considered a big purchase for most homeowners. It is the biggest asset for most families and individuals to keep. So it is essential to safeguard this asset. The first step in doing so is by knowing what type of home loan is best suited for you. Here are a few types of home loans.
This is one of the oldest forms of home loans. Home equity refers to the difference between what a homeowner has paid so far on his home and the total value of the home. Equity or the value of the home is calculated by adding the mortgage balance, existing home improvements, any accumulated appreciation, and outstanding taxes together. The value of home equity is the homeowners’ best chance of getting a home loan that suits their individual needs and requirements.
collateral such as real estate or personal properties
Another type of home loan is secured home loans. This is basically a loan where collateral such as real estate or personal properties will be put up. The homeowner will need to put up his security when applying for the loan. The amount of money the borrower can borrow depends on how much equity he has on his home and how much he is willing to give up for the loan. Higher interest rates also apply to secured home loans.
unsecured home loans
Unsecured home loans are those in which no collateral is required. These home loans are very common and are usually the first choice of most homebuyers. These home loans are usually less expensive, flexible, and have better interest rates. As unsecured home loans are very common, many homebuyers usually get several quotes for the home loan they intend to purchase using this type.
Home equity line of credit
Home equity line of credit (HELOC) is another type of home loan available. This type of home loan is based on your current ability to repay. The lender will consider your credit history, income, debt to income ratio, current balance, anticipated expenses, and potential for future expenses when deciding whether to approve or deny your application for a HELOC. If you have been paying back previous loans, the lender may look at your possibility of paying off a HELOC rather than a home equity line of credit.
You can also opt to apply for an unsecured personal loan. These home loans are very popular because they do not require collateral as with secured home loans. Personal loans can be used for a variety of purposes such as for debt consolidation, vacation, a major purchase, or even for starting your own business. The only thing that you have to consider is your credit history since these home loans are based on your credit history.