So, you want to purchase your first house? Great! Now, where to start? Or rather, where not start with the process of securing finances for your dream home?
You might be wondering what you need to know about getting a loan, whether it’s from a bank or a commercial finance company.
Here is an article that will help you get started on the process of buying your very own house! Read on to learn more about securing the funds necessary for this major life change.
Financing Your Dream Home
When purchasing a house, it can seem overwhelming at first due to the number of choices available and depending on your own particular circumstances. It can be difficult to know how to get started on the process; where exactly to begin, what you should do first, and which way you should turn next.
How can you even start financing your dream home?
Where To Begin?
The first decision you’ll need to make is whether or not you want a mortgage loan or if you want to borrow money from family or friends.
If your answer is yes to a loan, then congratulations, you’ve taken the first step! Next, you’ll need to ensure that the loan that you end up with is the most suitable for your particular set of circumstances, including whether you take a mortgage or a bridge loan:
A Mortgage
The purpose of a mortgage loan is to allow homeowners to purchase homes and pay back the loan with interest over time. This is the most common type of house-purchase loan and most people will make fixed payments each month, which will be equal to a portion of their monthly income.
Borrowers are typically required to put down a minimum of 20% when applying for financing and are expected to pay off the principal payment over a period of between 25 and 30 years.
A mortgage or home equity loan is the most common kind of financing instrument required by lenders. The borrower will usually have up to 75% of their home’s value financed by the lender, which is called an immovable asset discount. This loan will come with regular payments, in accordance with the stipulations of the agreement.
Bridge Loans
Bridge loans are typically secured loans that are normally offered by banks and building societies. The intention of such a loan is to help those who cannot easily obtain a bank loan, for example because they have a poor credit history, bad credit rating, or bad debt related to their current mortgage. There is normally no set term for the duration of the loan.
You will be required to make regular monthly payments like with a mortgage and, like other loans, you will need to put down at least 20% of your home’s value.
The main difference with bridge loans is that they can take longer than normal bank loans to repay; normally between 5 and 10 years. With this type of loan you will also have to pay a higher rate of interest.
