Home Loans

A home loan is a sum of money borrowed from a bank or other lending institution in which the home property is used as security.http://wordnetweb.princeton.edu/perl/webwn?s=home%20loan Generally, a home loan is payed off in monthly installments for a set period of time until the money has all been returned. Home loans may take on a variety of different structures, and interest rates may vary according to numerous factors.

Often, home loans are used to allow purchasers to pay for their house, condo, mobile home or other type of home unit. Sometimes those who have already purchased their homes take out what is known as a home equity loan, which allows them to borrow money using the home as collateral.http://banking.about.com/od/loans/a/homeequityloans.htm The loans referred to in this page are those used to initially purchase a home.

When it comes to home loans, there are two main categories: fixed rate loans and adjustable loans. The differences between the two are as follows:

• Fixed rate home loans: In this type of loan, the principle and interest rate remains fixed for the duration of the loan, and the monthly payment stays the same. These loans may be paid back in 15, 20 or 30 years.http://www.hud.gov/buying/booklet.pdf
• Adjustable rate home loans: For this variety of loan, the initial interest rate is often lower than a fixed rate loan. However, the rate is subject to change over the life of the loan and may go either up or down. The interest rate can depend on market conditions, but there may be fixed minimum and maximum rates. The monthly payment will change according to any new interest rate that is applied.http://www.hud.gov/buying/booklet.pdf

The content in this page is not a substitute for professional financial advice. Please contact your financial adviser before using the information presented here.