You know that you’re an adult when you decide to own your own home. Homeowners everywhere make it sound so easy, don’t they? Your peers and friends talk endlessly about negotiating a new monthly payment and how having no landlords, but themselves gives them the freedom they wouldn’t ordinarily have. Ads on the T.V., too, endlessly going on about home equity and how this or that lender will offer you the best rates on your mortgage, are doing nothing but enticing you to join the other homeowners and start the process of buying your own place.
In fairness, it isn’t a bad choice to make. Many homeowners are incredibly comfortable now, and some repeat homebuyers earn quite a tidy sum of money by renting out properties. Considering how much the recent pandemic has forced families to isolate themselves together, it shouldn’t be a surprise to see that some home loans offer people to put all of the family members into one property. So-called “granny flats” or “in-law suites” are additional apartments connected to the primary home in which your or your spouse’s parents and older relatives live. These can be garage apartments built into what is already there or an extra build altogether, attached to the home. Either way, they increase your home equity considerably, should you come to sell later on down the line.
Before you get there, you first need to own a home, and for that, you’ll need a mortgage.
First off, a mortgage is a home loan, and it comes in different forms. We’ll get into that in a moment, but the first thing to learn is how you’re given a home loan in the first place. Having found your dream home and comparing different home loan options online, you can pick a lender with the best mortgage rates. This mortgage lender runs a series of credit checks to ensure that you have enough equity to pay back the home loan over monthly payments without problems. This is known as pre-approval, but this is a little misleading. There’s no guarantee that your lender will give you the loan. long-standing
You don’t need excellent credit, but it helps not have any long standing debtor to hit at least the minimum credit score. After a little bit of negotiation, your lender (which could be a bank or a mortgage company) will make some rate adjustments, and then you’ll have your home loan ready to go.
Now, there are some limitations; obviously, it won’t be likely that you can get a home loan for a 10-bedroom mansion if you’re on a $30k annual income. Your credit check will show that there is no way you could pay off a multi-million dollar estate in one lifetime unless you won the lottery or became a Hollywood star!
It helps manage your expectations, and your pre-approval will tell you what price range to aim for. Also, don’t forget that this is a loan, not a subsidiary. You’re expected to make at least minimum payments on your regular mortgage rates. If there is an odd problem with this, your lender will need to know, but it shouldn’t be an issue. However, if you continue to miss your monthly payments, you risk defaulting on your property, and they can repossess the home. That being said, there are types of home loans that will account for any potential issues.
A mortgage may be a home loan, but there are different types of these that you can apply for. It’s simply a matter of talking with your lender to determine which is the best. Having variation helps, particularly if you don’t have excellent credit, but a choice of any of these will make your family homeowners in no time.
- Variable Interest Rate Loans – This is determined by the market interest rates or the value of the interest rate on the currency in the country you reside in. It’s great if the interest rate decreased, but not quite so fun if it increases. That said, there are pros and cons that a lender can explain far more than limit the effect of a growing interest rate.
- Fixed-Rate Home Loans – These are similarly determined by the interest rate, except with these loans, it can be fixed for a period of time, so if the interest rate rises, your mortgage does not.
- Interest-only Home Loans – After a period of time, your repayments will be for the interest on the loan and not the loan itself.
- Split Loan – Exactly as it sounds, part of the repayments can be variable, but part is fixed.
Finally, there is your standard home loan, in which you pay back the loan and the interest rate together in your monthly payments. If you’re having trouble deciding which kind of loan to get, you may want to talk with a financial advisor.