Rare is the home buyer who can hand over a check for full cash payment for their new house. The vast majority of prospective home buyers need financing and that typically means taking out some type of a loan. Comparing home loans can be a hassle, but fortunately there are websites out there that let you compare home loans. Here are some of the most common types of home loans.
First home owner
First home owner loans are loans given on terms that make it easier for people to buy their first home. They are sometimes also referred to as "first time home buyer" loans. The name is somewhat misleading as those who have previously purchased a home in the past may still be eligible for a first home owner loan.
With a first time home owner loan, qualified borrowers are given various types of financial assistance. For instance, a first home owner loan may provide for a low down payment, lower interest rates, deferred payments or limited lender fees.
Fixed rate
A fixed rate loan is a loan with an interest rate that will not change over the life of the loan. The interest rate stays the same so it is said to be "fixed." Fixed rate loans are the opposite of a variable interest rate loan, which has an interest rate that can increase or decrease numerous times over the loan's lifecycle. Predictability is one of the main benefits of a fixed rate loan. The borrower will always know how much their payments are going to be, making long-term financial planning easier.
Refinance home loans
A refinance home loan is a home loan taken out in order to pay off your current home loan. This process is known as mortgage refinancing. In essence, you are exchanging one mortgage for another.
There are two main reasons why people refinance their mortgage. First, you may be able to get a lower interest rate. A lower interest rate means lower monthly payments and more equity. Second, some people refinance in order to shorten the term of their mortgage. For instance, if current interest rates are lower, you may be able to get a 15-year fixed rate mortgage for the same monthly payments as you were making on your 30-year loan.
Low doc / No Doc Home Loans
Low doc stands for low documentation. These are loans given to buyers who are unable to provide proof of income and so are unable to apply for a standard loan. The name "low doc" refers to the fact that minimal documentation is required in order to obtain one of these loans. You may also hear them referred to as a "no doc" loan.
No proof of income is required to get a low doc loan. Instead you complete an Income Declaration Form on which you self-declare your income. The lender does not take any steps to verify the income stated on the form.
Low doc loans are particularly helpful to small business owners and people who are self-employed. Often these people are capable of making loan payments but don't have published income figures to substantiate their financial stability.
These represent four of the most common types of home loans, but this list is by no means exhaustive. What you can see, however, is that there are a variety of options for those looking to finance a home, or even refinance the one they already own. Every person's financial circumstances are unique, and fortunately, lending institutions provide loans on a wide range of terms to meet those needs.
To compare all the different types of home loans mentioned in this article, check out http://www.mozo.com.au/
This article was brought to you by Mozo - an easier way to compare home loans.
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