Home Loans

Home loans or mortgages are loans borrowed to purchase obviously a house or dwelling.

Home loans terms commonly range from 25 to 30 years in length. The interest rate is comparitively low when compared to other forms of borrowing however due to the this length of time the interest paid on the loan is very high. This leads to very small reductions in the loan in the initial years.

Lenders often wish to see a savings history from the borrowers in order to prove up their ability to make the repayments.

Lenders do not usually lend the full amount of the purchase price but require the borrower to fund the difference. Lenders may lend up to 90% or more of the value but this can and does change according to the economic situation and each individual lender.

Lenders will also get third party valuations on the property to ensure the purchase price is right. The reason for this is if you fail to make repayments they will foreclose and sell the property to recoup their loan.

Home loans are typically split into two groups; basic and standard loans.

The difference between the loans is typically the number of features of the loans. It is common for the difference in interest rates to be about half a percent. This is a major issue to be considered as over the life of the loan this can add up to over a years repayment difference.

The main point of difference in home loans are the interest rate and fees cost.

Common fees include:

  • establishment fee
  • ongoing monthly fees
  • withdrawal fees (if withdrawing equity)
  • late payment fees