Cheap Home Loan

By: EconomyWatch Content   Date: 26 November 2009

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Finding a home loan has become extremely easy with the increasing number of home loan lenders in the market. The intricacy lies in obtaining a cheap home loan. A home mortgage is a long-term commitment, which if defaulted, can result in permanent credit damage. Finding a cheap home loan sets the foundation of improving and maintaining a good credit rating.

Cheap Home Loan: Deciding Factors

Consider the following parameters that financial institutions review while deciding to grant a cheap home loan: 

  • Annual income: Generally, a bank reviews a person’s income history spanning  up to five years.

  • Spouse’s income: An earning spouse increases the chances of obtaining a cheap home loan rate. It reinforces the borrower’s ability to repay the loan.

  • Previous loans: Numerous open lines of credit make lenders hesitant to grant a home loan, as it is a long-term obligation that may be compromised for other short-term debts.

  • Assets owned: Owning assets like a land or a vehicle is useful as they may be mortgaged in favor of the new loan.

  • Work stability: This is an important factor as an individual with a volatile job profile fails to get cheap home loan rates.

Cheap Home Loan: Coverage

A cheap home loan can be acquired for not just purchasing a home, but for the following reasons as well:

Home construction: These loans help to finance construction of a home, an apartment or a complex intended for renting. Furthermore, these loans can be availed for constructing smaller additional provisions, such as a larger bathroom.

Home improvement: These loans help to improve/modify various aspects of an owned home, from external repairs to internal plumbing and electrical work. To avail a home improvement loan, one has to first create an estimate of the amount required for the plan and propose the same to a lender. Lenders generally verify the expenses with different constructors and visit the borrower’s home to assess the situation. These are some basic checks before a loan is sanctioned. Some banks may ask borrowers to produce their  payment receipts.

It is also possible to get a cheap home loan using proceeds from the sale of an old property. This form of home financing, known as a bridge home loan, is applied during the interim period between the purchase and the sale. It is usually granted for a maximum of two years.


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