Most people are used to using the terms home loans and mortgage loans for the same purpose. Did you know that they carry different meanings? You should strive to understand the difference between the two before requesting foe either
Mortgage is security instruments that are less risky. When a mortgage loan is approved, the property is listed as collateral to secure the loan. The mortgage is in form of a document. It is the agreement that protects the security of the lender using the property they gave you money to buy. This means in the event you are unable to pay back the loan in time, the lender has the power and permission from your agreement to take the property and sell it to recover the remaining debt else. The mortgage loan is strictly for purchasing property by the buyer. You cannot use a mortgage to purchase anything other than the property.
Getting a Home Loan
A home loan is money advance provided by the lender to purchase home property. Unlike the mortgage, a home loan can purchase a wide variety of home properties. Purchasing of property may not be the main reason for receiving a home loan.
A home loan is offered by the lender for a long term period. The interest in a mortgage accumulates as soon as your request is approved. The most common payment method is the monthly instalments where the total loan is distributed in months. The amount of the distribution depends on the income. The more the income, the more of the mortgage loan you will pay monthly. A mortgage loan is convenient when your only needs are purchasing a new home. The interest rate of a mortgage loan is constant and lenders provide different payment methods. You may choose to pay off the interest first or pay for a combination of the interest rates and the money to be repaid.
In home loans, a small amount of money is offered to the buyer over a short time. The money provided to the buyer is not restricted to the payment of the house being sold. You can use home loans to buy personal properties, fund investment properties, emergency expenses and making home improvements. Home loans accumulate a high interest rate and have a short term payment period. Home loans can be very risky when using them for emergency purposes. Home loan is secured or insecure with a high risk. Using home loans for basic utilities like clothing, good and other bills does not generate any positive returns. The home loan will therefore end up acting like an additional credit and mess up with your budge in the future.
Choose a Loan that fits Your Needs
Choosing the loan that fits you depends on your needs, finances and income. Lenders will check your deposit, income and credit rating before giving you either of the loans. Taking a home loan for non-beneficial purposes can lower the point sin your credit. You need to work with a good home owner and mortgage broker to guide you through making the right decisions.