Homeowner Loans ? Drawing Lessons of the Past

Loans are not of a recent origin. People used to take help from others even at times when money was unseen and barter was the mode of trade prevalent. However, the form of loans has changed over time. In those days the loans used to be offered in kind. Now, they are offered in money or in terms of money.

However, the concern for the safety of the amount lent has not changed a bit. The most preferred loans are those which are offered with sufficient backing. The backing in most cases is of the house and property of the borrower. Thus, these are also known as loans for homeowners.

Loans for homeowners, as can be recollected from the above are loans which are offered to homeowners with home or property serving as a collateral. These accrue interest at a certain rate which is added to the principal amount. They are repayable through small instalments or any method desired by the borrowers.

Offering the home as collateral does not cease the rights of the borrowers as the owner of the home. Though the lender holds the ownership rights to the home, these are exercisable only when the borrower does not repay the entire amount of the loan. The borrower stays in the home and even regains the rights when the final instalment to the loan is paid. Borrowers can sell off the home put as collateral, provided it is allowed by the lender. They will however have to repay the entire amount of the loan with the sale proceedings received. Alternatively, the loan will be attached to the new home or property purchased.

But, can the worst nightmare regarding the repossession of home ever come true? Yes it can. The lenders will, after resorting to all steps to get the money back, resort to repossession of the home, if the borrower does not repay the loan in full.

The failure in making payments to the loan is generally attributed to an intentional default on the part of the borrower. Though the reason cannot be altogether cancelled out, the cases are relatively less. Seldom will borrowers desire to endanger their homes by being irregular in the repayments.

A more relevant reason explaining the defaults are the wrong decisions that people tend to make when going for loans. Most of the decisions are made in haste or without having a proper knowledge of the subject. People rarely foresee the effects the decision can have on the future of the loan. These make the repayments difficult. People try to provide for them with their limited monthly incomes. When they cannot or when other important expenditures take a major share on the income, they default on the repayments.

The following section will describe the wrong decisions made by borrowers and how they can improve their state by learning from their mistakes.

Decision on the amount of loan:
This is the biggest mistake that people tend to make when looking for loans. Had the loans required no repayment, there would have been no limits to the borrowings. Since these are to be repaid along with an interest for the period, it will be necessary to consider carefully ones repayment capacity before deciding the amount of loan. Not only the present income but the projected income at the time of repayment will have to be considered while deciding the amount. The amount of equity in the home also decides the loan granted. However, it will not be advisable to exhaust the equity in home at one single instance.

Decision on the interest rate
Who thought interest is simply a single digit factor having not much of significance in the final cost. The search process can be time taking. People take up loans with interest rates higher than what they are eligible to get.

Interest is set as a percentage of the loan amount. It is dependant on a number of factors like the interest rate prevalent in the market, type of loan taken, case factors of the borrower, etc. Thus the interest charged may differ with the lenders. People can get exclusive deals in loans if a proper search is made. Awareness of the various interest options like discounted interest rate, capped rate, and fixed rate can also help lower the cost of repayments.

Decision on the loan provider
The loan provider as we learnt plays an important role in the loans for homeowners. The offerings of the lenders may differ because of the discounts and offers appended. A reputable lender is attached to many more lenders. Thus a single application is routed to hundreds of other lenders. This increases the size of lenders available. There are many more advantages of dealing with the reputable lenders. The service that these lenders provide is more trustworthy. They comply with the legal and quality certifications in offering the financial products, thus making their services unmatched.

Decision on repayment
The borrower rids himself of the loan by repaying the amount. The most conventional form of repayment is through monthly or quarterly instalments. This is useful for the borrowers who receive a fixed income. The instalment is chosen by the borrower according to his income. Borrowers can lessen the amount of monthly repayments by paying only the interest. This is an interest only method of making repayments. Repayments can also be made all at once to save on the interest cost.

According to an old maxim it is human to do mistakes, but it is foolish to repeat the mistakes. The experiences with a former loan can serve as a lesson for those who are struggling to come out of the loan trap. The first timers in the loans market however do not need to take the dip to learn the ways of the loan market. Learning from the experiences of the predecessors can protect them from being trapped in such deals.

Andrew baker has done his masters in finance from CPIT.He is engaged in providing free,professional,and independent advice to the residents of the UK.He works for the Secured loan web site loans fiesta for any type of loans in uk,secured loans please visit http://www.loansfiesta.co.uk

---

Tips For First Home Buyers On Getting Home Loans

Buying your first home will likely be the biggest and... Read More

Home Equity Lines of Credit Vs. Other Conventional Loans

When it comes to getting money, you have two basic... Read More

Securing a US Commercial Mortgage

What's the most efficient way to secure a US Commercial... Read More

Home Mortgages: Think Before You Borrow

In today's overheated housing market, lenders are making it easier... Read More

Recent Bankruptcy? Its Not Impossible to Obtain a Home Loan

Because the new bankruptcy laws go into effect on October... Read More

Guide to Mortgage Terms

Listed below is a guide to mortgage terms. It is... Read More

Reverse Mortgages ? A Tax Free Income For Senior Citizens

I fully realize if it sounds too good to be... Read More

Uk House Price Increases Take A Summer Holiday

Property website Rightmove has released its latest house price index... Read More

New York Refinance - Refinancing in New York

If you are looking to refinance in New York, it... Read More

Buying a Home when Rates go Up

Many people fret the rising tide of interest rates. You'll... Read More

Option One Mortgage Loans ? Getting an Option ARM or Option One Mortgage Loan

Have you heard about or been interested in finding out... Read More

Do Your Homework - Find the Mortgage That Fits Your Lifestyle and Your Budget

You've been looking at houses for months, and finally you've... Read More

Think You Cant Get a Mortgage?

You've finally found that dream home that you have always... Read More

Home Equity Loan Considerations

In other words, the benefit of the loan must outlast... Read More

Money Smart Homeowners Use this Mortgage Strategy Every Time

There are currently more than 50 million home mortgages in... Read More

Online Home Equity Loans: A Basic Glossary

Home equity loans can be a great idea for individuals... Read More

Understanding Fixed-rate Mortgages

A fixed-rate mortgage is a mortgage on which the interest... Read More

Key an Eye on Your Mortgage Payments

In previous decades, when a borrower missed a payment on... Read More

A Guide to Direct Homeowner Loans

Are you considering applying for direct homeowner loans? Perhaps you're... Read More

How Good a Deal Is Your Banks Mortgage Insurance Plan?

When you go to the bank to get a mortgage,... Read More

Guide to Flexible Mortgages

Outlined below is a useful guide to flexible mortgages. Flexible... Read More

Mortgage: Rehabilitation Of Financial Helplessness

The term 'mortgage' is assumed really controversial by people when... Read More

Mortgage After Bankruptcy

Most people probably assume that obtaining a mortgage to purchase... Read More

A Home Equity Loan - What You Should Know?

Asking yourself, "Is a home equity loan right for me?"... Read More

How to Find a Direct Homeowner Loan

If you've been thinking about applying for a direct homeowner... Read More

Zero Down Payment Mortgage ? Can It Be Done?

"I've been renting for years now; I've always paid my... Read More

Reverse Mortgage Offers Fresh Approach To Income From Real Estate

If you owe 40 percent or less of your original... Read More

Fixed Versus Adjustable Rate Mortgages

Which One Should You Choose?Choosing between a fixed rate loan... Read More

Why Choose a Remortgage?

A remortgage can be used for the purpose of gaining... Read More

How to Get a Cheap Homeowner Loan

If you're looking for a cheap homeowner loan, you might... Read More

Tips for Finding the Best Agri Mortgage and the Best Agri Loan

The Research Rates of Agri MortgageFirst thing, when finding an... Read More

Fixed Rate Mortgage Loans - Understand the Pros and Cons of the Fixed Rate Mortgage

There are many benefits and drawbacks to consider when deciding... Read More

Buying a Home With Bad Credit - Get Approved With a Recent Bankruptcy or Foreclosure

A few years ago, if you had a bankruptcy or... Read More