A home loan, also known as a mortgage, is a loan specifically used to purchase or refinance real estate. The property you buy serves as collateral for the loan, meaning the lender can take ownership of the property if you fail to make the required payments.
Here’s a brief overview:
- Types of Home Loans: Common types include fixed-rate mortgages (where the interest rate stays the same throughout the loan term) and adjustable-rate mortgages (where the interest rate can fluctuate).
- Down Payment: Most home loans require a down payment, which is a percentage of the property’s purchase price paid upfront.
- Loan Term: Home loans typically have long repayment terms, such as 15, 20, or 30 years.
- Interest Rates: The rate can be fixed or variable, affecting how much you’ll pay over the life of the loan.
- Monthly Payments: Payments usually include principal (the amount borrowed) and interest, and may also cover property taxes and insurance.
