When you buy a home, you are unlikely to be able to purchase it outright without any type of loan due to the high price of the home. As such, most people turn to some form of financing for their home that allows them to cover the purchase price which they repay over the life of their loan. There are a number of different homeowner loan options that are available to homeowners which will be outlined in this article.
By far the most common type of homeowner loan is a mortgage loan. A homeowner loan is one in which you make a down payment on your home, typically ranging from ten to twenty percent, or higher, and repay the rest over a predetermined time frame. Many mortgage loans will fluctuate from 10 to 30 years in length and have fixed interest rates, though some operate with variable interest rates that are attached to them. Mortgage lenders will examine your income level and make a mortgage loan based on some multiple of your income level.
Some people will take out second mortgages or loans and use this money for the down payment or for major renovations on their home. A second mortgage will often provide them with the ability to have major construction or renovations done on a home, but is often at a higher rate of interest than their initial mortgage loan is. The terms of these loans and other factors are variable based on numerous factors which are unique to each borrower.
Advantage of Homeowner Loans
Homeowner loans have the advantage of being provided even if you have limited down payment amounts and can allow you to buy a big asset that you wouldn't be able to otherwise afford. Since the lender is protected by the value of your home they are often willing to loan at a reasonable interest rate that makes home ownership an affordable option.