As a first-time home buyer, you may find yourself a little overwhelmed by the types of loans that are available to you. In part 4 of our series on types of home loans, we’ll cover some of the possibilities that first-time home buyers tend to miss.
If you feel as though honeymoon loans, low doc loans, or construction loans are not giving you the terms you require, then you’ll want to learn more about some of your alternatives. As you are going to discover, there are a variety of possibilities out there.
Other common loan types
Here are a few of the other loan types you should take the time to research in greater detail:
- Bridging loans: The concept of bridging finance simply means securing the funds you need to cover the inevitable gap that exists between having to pay for your new property, and receiving the money you’ve made from the property you’ve just sold. The lender will likely take security over both properties.
- Line of credit/equity line: Some people like to compare having a line of credit/equity line to having a huge, seemingly limitless cheque book. There is a very small sliver of truth to that, but it’s important to keep a few elements to this option in mind. For one thing, it’s not free money. You will have to remember that interest is going to continue to accrue on the balance. Furthermore, you can spend your approved limit all at once, or a piece-at-a-time. One of the nice things about this option is the fact that just because you have a certain amount in your line of credit, that doesn’t mean you have to actually spend all of it. At the same time, understand that you will not have to pay the interest on the money you don’t spend.
- Reverse mortgages: Chances are; you’ve seen one or two commercials that are advertising reverse mortgages. This option is designed to appeal to retirees who would like to use the equity that is currently built up in their homes to supplement whatever they are drawing from their retirement. The money is generally paid through instalments, although some lenders will give you the option to have it given to you as a lump sum. However, the terms of the loan can wind up providing a potential beneficiary with an unpleasant surprise, when it comes to inheritance later on.
This should give you a basic overview of these types of home loans. But remember, the Specialist lending consultants at YFG lending are there to guide you through the process.
