There will be times in our lives when we require funds immediately. Being a homeowner is a blessing in such cases as you can mortgage your home to get the funds. A mortgage loan has the greatest advantage: you don't have to leave your property.
A mortgage loan is simply a loan that you take out on a property you already own. It could be your house, shop, or a non-agricultural parcel of land. Banks and non-banking finance firms can offer mortgage loans. Good home mortgage lenders will provide you with the principal amount of the loan and charge you interest. You can repay your loan in monthly installments.
Your collateral is your property. It remains in the possession of the lender until it is fully repaid. The lender is entitled to a legal claim on the property during the term of the loan. If the borrower fails to pay the loan in full, the lender can seize the property and sell it.
Different interest rates for mortgage loans
Your mortgage loan can be paid off with either a fixed or floating interest rate. Let's look at the differences between the two.
Fixed interest rate: A fixed interest rate is the rate that remains constant for the duration of the loan. If you choose shorter periods, you may be able to opt for a fixed rate. A fixed interest rate may not be available if you are looking for a longer term home loan.
Floating interest rate: The market rate determines interest rates. Although it is impossible to predict the interest rate, you can see the current rate on the lender's website. This interest rate can fluctuate and is directly related to the marginal cost of funds lending rate, or MCLR.