The massive market crash witnessed almost all over the world in 2008 is usually credited to the solitary reason being Subprime, at least is the case in the USA. There are many out there who won’t be familiar with this term. Subprime is a type of loan usually given to an individual with a limited or poor credit history. Even individuals who have good credit history tend to be classified under the subprime category. The reason being that many a time they choose not to fully disclose or verify their income or assets provided in the process. Subprime loans tend to have high credit risks and garner high interest rates. Lenders use a detailed credit scoring system to determine whether a borrower can qualify for a loan and which kinds of loans. Today many prospective home owners are in the dark about the home loans, collateral, annual percentage rate (APR) etc.
In this post we shed some light on something which you might be unaware of. Annual percentage rate The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan.
To new home buyers, always make sure when going in for a home loan to check on interest rates with various lenders and to see which one’s offer the best package. Since home buyers usually take loans over a long term, interest rates and the terms of the loan are always negotiable. When you negotiate the interest rate and other terms of the loan, in turn it reduces the amount you owe to the bank in the long run or you can use the same to put it back in the repayment of the loan and shorten the time span of the loan.
Here are some helpful tips if you are looking to take a home loan:
- Banks charge a processing fee when giving loans, these usually range between .50 – 1%. On some occasions such as festive seasons banks waiver the processing fee, so always get an idea of the processing fee charged.
- Check out the best interest rates banks offer. Always go to different banks and check out the interest rates on offer and see the best deals you get, even a small slash in rates can make a world of a difference since home loans tend to be big (30 Lakhs+ home loan).
- When opting for a home loan, always take the time to read the loan agreement. Agreements generally tend to be very detailed but studying its content is always beneficial.
- Always keep in mind the job you have, since a part of your salary will go into paying back the loan. If you are in a high tax bracket it’s always better to opt for a home loan, which will enable you to avail to tax breaks for the principal amount paid on the interest. If possible try to set aside a sizable amount of money so as to be able to clear off the loan early which again will avail you to a tax break.
With these tips we hope that you move in to a house quickly and you choose wisely.