Mortgage Loan, Home Mortgage in India
Security for the loan that the lender makes to the borrower is known as the Mortgage. Home Mortgage loan is the loan secured by real property which is offered by the borrower to the lender against loan taken. Home mortgage loan is easily available in the market. Different lenders of mortgage loan can be searched on internet. Due to competition in the market, borrower can get the loan at cheap rate and low fees.
There are many companies offering home mortgage loan, hence you should make sure as to which company provides the best customer service. The dealing with home mortgage loan company is for a long period and therefore make sure it is with the company you want to deal with.
The borrower should understand the terms and conditions and the fees and cost of money that will apply on the loan amount taken before opting for the loan from a company. You should be aware of different terms like length of the loan, rate of interest, type of fees and costs, etc. These can be referred as closing costs of the loan.
The term of the loan or the period in which the loan amount is to be repaid varies from 12 yrs to 50 yrs. If you choose to repay the loan in 30 years the monthly installment to be paid is less but you can add extra income to the monthly installment in order to repay the loan early and thus save on cost.
Interest on Mortgage loan is most expensive cost on loan. Sometimes it even exceeds the principle amount. The interest on loan depends on various factors like the term of loan, credit score, type of mortgage i.e. fixed rate or adjustable rate and the size of the loan.
The final important feature of mortgage loan is that of closing cost. It includes various costs on the loan amount like points, loan origination fees, document preparation fees, title search, title insurance, and appraisal fees. You be careful as the total cost on loan might be come to high if you are not aware. If possible pay the cost on loan in cash in order to save the interest on it.
Mortgage loan may differ on various factors such as terms, payment amount, frequencies, etc but the most essential factor is interest. Depending on it, mortgage loans may be divided in two basic types - fixed rate mortgages and adjustable rate mortgages also referred as floating or variable rate mortgages.
- Fixed rate mortgage – The interest rate remains the same for the entire loan period. There is no fluctuation in the rate with the market.
- Variable rate mortgage – The interest rate fluctuates with fluctuation in the market rate.
- It is also possible to opt for combination of fixed and variable rate of interest. For some years the rate of interest is fixed and later on it fluctuates with the market rate.
Taking loan is simple but its repayment is a burden. The best strategy is pay extra money every monthly apart from monthly installment in order to repay the loan amount faster and also save on the cost of loan in the form of interest.
Some people make small payments in the early period of repayment and then pay the lumpsum amount at the end. This is suitable for those who a expecting a lumpsum amount in near future. This is known as balloon payment of Mortgage loan.
In India, people try to repay the loan as early as possible so as to reduce the burden of loan and also save on the cost of interest. So whenever they receive some extra income they pay towards loan repayment. But some companies charge a penalty on prepayment of the loan amount. Therefore you should make sure that there is no penalty on the prepayment.