For most people in the UK, home loans necessarily connote cheap
finance. How can they not get cheaper finance when they have
offered lien on home to loan provider? Loan providers however
devise ways to overcharge borrowers who are not much conversant
with the ways of the financial market. Interest is generally
charged on the higher side, and borrowers also have to shell a
larger sum as fees for the services of the lender.
So, does the concept of cheap home loans not exist? Cheap
Home Loans do exist, but not as a rule. Cheap home loans
have to be supplemented with sufficient efforts on the part of
the borrower to make them possible. Though borrowers may not
rest at any stage of the life of the loan and keep an eye on
every cost that is added to the loan, efforts will have to be
primarily made during the planning and decision making stage.
The fate of cheap home loan is largely dependant on the work
done during these two stages.
Every borrower need not be well informed about the rules and
regulations of the financial market. The advice gained from
external sources will be as much helpful as ones personal
knowledge or experience. Among external sources, independent
financial advisors are the most revered. Independent financial
advisors are bound by Financial Services Authority rules to
offer genuine expert advice. Because of the professional and
independent advice that they offer, it will be difficult to
discount their importance.
Home loans are offered against the equity in ones home. Equity
is the approximate value that a house will fetch if sold. For a
more appropriate valuation of equity, all mortgages and loans
secured against home are to be deducted. Equity plays a decisive
role in lowering cost of home loans. Lenders vie to lend to
homeowners with larger home equity because of the potential
safety that they allow. The safety will be in terms of the risk
that a loan venture poses for the lending agency. As potential
risk on home loans can be easily covered through repossession of
the home itself, home loans are termed as low risk ventures.
Accordingly, home loan borrowers are preferred over borrowers of
unsecured loans.
Borrowers need to take maximum benefit of the preference shown
by loan providers. Since, the number of loan providers dealing
in home loans is very large, borrowers can easily compare and
choose lender offering the best package. It is at this stage
that the decision making skills of the borrowers are best
utilised. Though inexpensiveness of home loans will be
preferred, it must not be at the cost of the other virtues.
Personal requirements of the borrower need to be held supreme
during the search process. Thus, a lender who lends at the
lowest APR may not suit the borrower if the amount lent is
inadequate.
Borrowers can draw any amount between £1,000 - £500,000 as the
home loan. The actual amount lent will depend on several factors
like the equity in home, borrowers credit history, etc. The loan
proceeds of a cheap home loan can supplement both mortgage and
secured loans. For readers who are conversant with the uses of
mortgages and secured loans, it will be common knowledge that
mortgage proceeds are used for buying or constructing house or
property and secured loan proceeds are used for other personal
financial needs, like debt consolidation, home improvement, etc.
Home loan proceeds can be used for either of the two. The tax
benefits available to borrowers on mortgages will continue in
cheap home loans too.
Now, we come to interest rates that form the most talked about
subject in cheap home loans. Typical APR on cheap home loan is
in the range of 5.75% to 10.3% variable. The actual APR pledged
to borrower may differ from the APR printed on the lender's
websites. Bank base rate changes and borrower's individual
credit circumstances may lead to differences in interest rate.
Negotiations on interest rates are possible. Borrowers, who are
desirous of entering into negotiations on interest rate, will
have to increase the amount of fees that they are ready to
offer. The objective of these negotiations will be to bring the
APR to the desired level.
Cheap home loan is a product of several decisions and
negotiations. Thanks to the large variety and options available
to borrowers, the decisions that borrowers need to make on home
loans have risen tremendously. However, the key to cheap home
loans will not be in meandering through these decisions, but in
making them correct. Consequently, the larger the number of
correct decisions, cheaper will the home loan be, and
vice-versa. It is now for you to decide where you want to stand-
with those who are finding home loans burdensome because of
incorrect decisions, or with those who are enjoying home loans
at the cheapest of rates.
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