Buying a home is always a dream come true for many. Most people see it as the best way to improve the asset-based and secure their future. If you too are planning to buy a new home, one of the most important things to do is to have your finances sorted. There are different home financing options to try and here are important characteristics about these sources of funding.
Fixed Rate Mortgage
This is a conventional financing option for most property developers. This type of loan requires the borrower to pay equal monthly installments within a fixed duration. Individuals with fixed monthly incomes highly prefer this types of loans. Normally, the repayment period can be quite long – though it depends on the principal loan amount and the monthly installments.
This financing option requires taking a loan for a new home against an existing asset. In this option, you are also required to pay the monthly installments just like a mortgage. The amount borrowed is often capped at 85% of the equity of your home. Failure to pay the loan means that the lender forecloses on your home.
A balloon payment essentially refers to a large made at the end of a loan term. This amount is often more than the totals of all other payments made before it. In the case of an interest-only home loan, the homeowner or buyer is allowed to defer paying the principal loan and instead makes interest payments. At the end of the term, the borrower is expected to clear the balance or refinance.
Lease Purchase Agreements
This is often a deal between a property owner and a tenant come potential buyer. Here, the buyer is expected to pay some down payment to the homeowner. After making this payment, he or she continues making monthly payments to the homeowner until the remaining balance is cleared. One can assume ownership once the whole amount is paid. The good thing about this option unlike living in an apartment is that the ‘rent’ you pay goes a long way in making one own a home.
There are multiple financing options to consider when it comes to buying a home. Since each option has its strong points, it is advisable to go for an option is most favorable to you. Here, it’s all about your interests considering that what worked for a friend might not apply to you.