Home loan jargon is like the most tedious game of Scrabble you've ever played. There are so many terminology to learn, and it might feel like bankers are deliberately making things difficult. In this article we discuss more home loan jargon that are a must when it comes to delving into the world of financial support for your home.
Home Construction Loan: Individuals who currently own a plot or piece of land and want to build a home on it might take out a home construction loan. This financing is excellent for those who want to build a new home on their property.
Home Extension Loan: You may apply for a home extension loan if you want to modify your home and add another room, such as a dining room, a storage room, or simply two smaller bedrooms out of one large bedroom. This financing also allows you to expand your present property by adding additional levels.
Home Improvement Loan: A home renovation loan normally covers all costs associated with updating your property, such as painting, remodeling, repairing leaking ceilings, and electrical repairs, among other things.
Home Loan Balance: A transfer that allows you to move the outstanding loan amount to a new lender with a cheaper interest rate and better terms and conditions.
Home Purchase Loan: This is the most frequent sort of home loan, and it allows you to buy a house, flat, or apartment that is either under construction or has had its construction finished.
Interest: Interest is the amount that the borrower must pay the lender in addition to the main loan amount. Borrowers can pick between two types of interest rates for their home loan: fixed and variable rates.
Joint house loan: A joint home loan is one in which two persons are mentioned on the loan. If you and your spouse are both listed as co-borrowers on a house loan, you may be able to register as joint home owners and benefit from tax deductions related to home loans.
Land Purchase Loan: A land purchase loan is another key house loan phrase. You can get a land purchase loan if you want to buy a parcel of land and build your home the way you want. People who want to build farm homes, bungalows, or villas typically take out these loans, with the land serving as security.
Loan-Value Ratio: The loan to value ratio, commonly abbreviated as LTV, simply means that the loan amount is divided by the entire worth of the property.
Margin: Margin is a very important concept in the world of home loans. The phrases margin and down payment are interchangeable in the context of house loans. The difference between the loan amount supplied by the lender and the actual property value is known as the margin. The majority of lenders normally give 80% of the real property value, with the borrower responsible for the remaining 20% as a margin or down payment.
Offer Letter: This is the formal confirmation given by the lender saying that your loan request is being considered. Also known as a sanction letter, this is the formal confirmation issued by the lender confirming that your loan request is being considered. The loan amount, interest rate, and kind, the loan tenure, monthly payments or EMI amount, terms and conditions, and so on are usually included in the offer letter. An offer letter is only good for six months, during which time you must finish the loan paperwork. The offer letter, however, does not imply that the loan would be disbursed. Only once the lender is satisfied that the property and documentation are in order is the loan money issued.
Pre-approved Property: Lenders do a sanity check before approving a loan request. They do their own due research on the property you want to buy, the builder, the project, and so on. They will make certain that a property's titles are clear. Lenders often form partnerships with builders, buildings, or projects, and the property may be regarded pre-approved by the lender in certain circumstances. In such circumstances, the builder might send you straight to a house finance lender. Despite this, purchasers should be wary of the house loan slogan "Caveat Emptor – Buyer Beware," which suggests that a pre-approved property isn't always a good investment.
Pre-closure: If a lender has sufficient funds to settle a loan before the end of the term, he can choose between pre-closure and foreclosure. To pay off his loan, he can simply make a lump sum payment. He may or may not be entitled for a penalty charge for terminating the loan before the stated term, depending on the loan amount he has returned.
Post Dated Cheques: Cheques that are dated ahead of time or post-dated must be provided, and the lender must cash them on your EMI date. Typically, the lender will want a 1-3 year supply of post-dated cheques, and you will be required to produce the cheques for the following years (during the loan term) on a regular basis. The borrower's signature and the EMI amount must be included on post-dated cheques addressed to the lender.
Resale Property: A resale property is a home loan word that refers to acquiring a home from someone who is selling their own home. As a result, it is considered a resale property. This simply implies that you are not buying a brand new house from a builder or a property that is currently being built.
Tenure: Home loans are offered for a certain length of time by lenders. EMIs with terms ranging from 20 to 25 years can be used to pay off your home loan principle and interest. Home loans are sometimes available with terms of up to 30 years. If you choose a long-term house loan, you will have to pay a high interest rate.
Top-up house loan: If you require additional funds beyond the amount of your current loan, you can apply for a top-up home loan.
Valuation: The process of a trained professional valuer assessing the true value of a property. Lenders typically demand valuations as part of the application process since they have legal validity.
Variable Interest: A variable interest rate that fluctuates over the life of the loan. The rate can go up or down, and it is influenced by the central bank's cash rate and other market activities.
Vendor: A vendor is the legal name for the person or entity selling the property in a real estate transaction.
Missed the first part of the glossary? View the home loan jargon you need to know from A to F here.