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Basic home loan concepts


New to home loans? Are you preparing to apply for one? Here we explain some basic concepts to help first-time borrower's.


1. House as security or collateral: In a home loan you offer your property as security to the lender. Upon failure of repayment, the bank will have the authority to claim legal rights to the property.

2. Down payment: Home loan lenders usually do not finance the total cost of the property. Lenders require a home buyer to pay to the seller of the property (or the builder) a minimum upfront amount as down payment out of the buyer's pocket. Typically, this amount is 85% of the cost of the property. Two useful tips for down payment are:

a) Start saving early so that you are not cash crunched at the time of your house purchase.

b) Contribute more as upfront amount as it will allow you to take a reduced amount of loan, and thereby possibly get better terms on the loan.

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