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Home loan can come in various flavors. Under the umbrella of home loans, one can obtain one of the following categories: refinance, mortgage, debt consolidation, or home equity loans. We will examine each in further detail.
If you are looking to buy a new property for you and your family, you can apply for a mortgage loan. Typically, the duration of a mortgage loan would range from a few years to 30 years or more and there are many varieties and categories of mortgage loans that you can qualify for. Some lenders extend the loan to individuals trying to rebuild credit and even to sub-prime customers. With the recent financial debacle, however, that might change during the next few years.
Since a mortgage loan is typically made against property as collateral, it is a secured loan.
Many apply for a secured loan in order to pay off an existing mortgage loan. Market interest rates would typically influence the decision as to whether or not to refinance an existing mortgage. Under certain circumstances, refinancing your home may be a smart move and may be able to save you up to hundreds or even thousands of dollars every year.
Home equity loan
One of the advantages of home ownership is that you accumulate equity on your property and this equity can be used as collateral in exchange for a loan. You can either apply for a home equity loan (lump sum) or a home equity line of credit (revolving).
Debt consolidation loan
Some programs allow you to pledge your property as collateral for a loan. You can then use this loan amount to pay off existing debt or
consolidate all your loans into one loan. Since this debt is secured, interest rates, and thus monthly payments, typically tend to be lower.
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Home Loan Tips
Evaluate your financial standing
Pull out all your financial documents to make an honest appraisal about where you stand financially-income and expenses. This is a very critical step as it will help you determine your ability to repay the loan you will be borrowing. Make an honest appraisal before you even embark on the purchase process. Knowing your ability will help you prepare for making all other decisions.
What is your credit standing
Home loans are often tied to your credit standing and typically, the better your credit rating, the higher the chance of securing a lower interest rate loan. If you feel your credit situation is not in optimal condition,
consider taking measures to improve your credit score. This one simple step will help you significantly. If necessary, you may also want to consider holding off the decision for some time.
Compare, compare, compare
Loans.net believes in a simple principle: compare and save. At Loans.net, we have simplified the process of comparing home loan terms offered by multiple lenders. In just a few clicks, you can easily compare home equity loan terms offered by different lenders.
Is there a tax advantage
When you are crunching numbers, carefully evaluate if there is a tax advantage to obtaining a home loan and if so how much and to what extent would it offset the costs associated with the loan. It may be an excellent idea to discuss details with your tax professional.
Create a comprehensive comparison table
Carefully read the fine print and list all the terms associated with each loan program. This will help you determine the most cost-effective means of securing a home loan. A spreadsheet will allow you to make a side-by-side analysis of the various programs available and then choose one that best matches your situation.