Factors That Determine The Amount Of A Mortgage Loan
Mortgage loans are financial services extended to home owners
, who in return, present their real property as security or collateral for the loan. The loans can either be used to purchase a home, or to simply do renovations and repair to an already existing house or home property. Firms that offer these services include banks, mortgage firms and other intermediaries that work with these two. A home buyer who needs the loan facility has to sign up with the institution and must present the documents that prove ownership or intention to become the owner of the property in question.
Mortgage loans are normally the most favorable option for people who do not have solid cash in their accounts to purchase a home. The mortgage loan plan has become very popular among many nations and it is a plan that has helped many people achieve their dreams of becoming home owners and real property managers. As a first time mortgage loan borrower, there are a few basics that you need to familiarize with before setting out to get the loan. The process of borrowing begins when the borrower pledges or displays an interest to the lender. The interest in this case is the collateral for the loan. The two parties enter into an agreement on the terms and conditions of borrowing of the loan.
Among the most crucial factors that need to be discussed upon are the amount to be borrowed or lent, the interest rate payable, and the repayment period. The amount to be borrowed in most cases depends on the value of the property at hand. The value may be dependent on whether the property is residential or commercial. The interest rates are normally determined by the lending institution, but the rates are controlled by the prices regulatory council, such that borrowers are not ripped off by lenders. It is dependent on the life span of the loan and it may be high or low, depending on the amount being borrowed. The repayment period and installment payable per month are agreed upon by the two parties, but in most cases, the life span of the loan is up to 30 years.
This may be longer or shorter depending on how much the borrower is willing to pay per month. Once all these factors have been agreed upon, it is then time for the borrower to make a down payment as is required by many lenders. The down payment is normally a calculated percentage of the total value of the property being acquired. The value is calculated through a number of methods, but more commonly, this is done through determining the actual transaction value, through an appraised value which is provided by a surveyor, or an approximated value that the lender determines through their own mechanisms.
Factors That Determine The Amount Of A Mortgage Loan
By: Peter Gitundu
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