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Financial Measures To Secure A Housing Property

Types of housing property

Property is anything that you own or control and are classified as real and personal properties based on the legal terms....

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What is a mortgage?

A mortgage is the financial agreement between the buyer and the lender...

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Financial Measures To Secure A Housing Property

The immediate, major goal of many of us after attaining financial independence aka job is, buying our ‘dream house’. Be it a simplex house or a bungalow, living in your own home, seals your heart with contentment and pleasure.

For some, it is a necessary condition to acquire a house quickly due to various personal situations like, living in a rented home, need for a big accommodative home for a large family etc.; whilefor others, it is a future investment. Whatever might be your reasons, it is always good to own a home for both practical and financial justifications.

But owning a home or land is not a child’s play. It requires careful research and planning, as it transpires with lots of practical and legal challenges. As the procedure involves a vast amount of money, one should prepare themselves financially before endorsing the big move.

Not all of us earn a six figure salary to secure our domicile with minimal financial pressures. This doesn’t mean you cannot realize at all the purchasing of your dream home. These days, banks and other credit unions like, offer lots of financial assistances like loans and mortgages to help us in owning our permanent home.

But before approaching the financial institutions for aid, you should confirm on your choice of home and property type.

Types of housing property

What exactly is a property? Is it any different from real estate?

Well, property is anything that you own or control and are classified as real and personal properties based on the legal terms. The land and its attachments like buildings come under real property and other tangible and intangible properties like money, jewels etc. link to the personal property.

A real estate is anything to do with land and it’s attachments that are either human-made like buildings, constructions etc. or nature-made like pond, trees etc. Generally, property and real estate terms are interchangeably used and therefore, refer to the buying of lands, houses etc.

A housing property is of following types,

  • Independent House

This is, as the name implies, a stand-alone house built on your land. You enjoy the ownership of land entirely and solely. Most people prefer this type of housing for the obvious reasons of freedom and privacy.

  • Condominium

A condo is a unit in a complex of buildings. This is something comparable to flat or apartment setup, except for the ownership. Here the owner enjoys the ownership of his own condo solely, while sharing the common areas with the vested parties like, other condo owners of their unit. The condominium management handles the entire condominium’s maintenanceby collecting monthly charges and maintenance fees.

  • Townhouse

A townhouse or terrace house is typically a duplex or triplex homes separated with common walls or compounds. The ownership is similar to that of a condominium’s, except that it allows the owner to enjoy some undivided extra share like backyard, garage etc.

  • Land

For whatever reasons, you may want to just invest on the land and postpone the housing construction later. So, buying a land means just acquiring the ownership of the ‘vacant land’ with no buildings on it. Certain people want to invest on the land for ‘flipping’ purposes; wherein the owner is eyeing for a reasonable profit by selling the land at the right time, when the real estate market tides are favorable.

What is a mortgage?

A mortgage is the financial agreement between the buyer and the lender, typically bank, who finance the purchasing of home, in exchange for the property’s legal title and interest payments by the buyer. In case of non-fulfillment or dishonesty, the financial institution has the legal rights to sell the property and compensate for the loaned amount.

Few of the common terminologies of mortgage are,

  • Down payment

This is the initial amount borne by you; as most of the banks will not offer to loan the entire purchasing amount and definitely expect you to pay as less as 3% of the loaned amount.

  • Principal

This is the loan amount offered by the bank, which is the purchasing cost minus the down payment made by you.

  • Interest

These are the monthly instalments for the loaned principal amount, the non-fulfillment of which may cause you to lose your home.

Types of mortgages

There are many types of mortgages offered by various financial bodies. The two basic and important types of mortgages, under which most of the varieties fit, are,

  1. Fixed-rate mortgage

As the name implies, it’s a straightforward type in which the interest amount remains constant for the entire loan period. For example, irrespective of inflation and market indexes, the interest rate for this type remains unaffected.

Pros: As the interest amount paid is constant, it helps the borrower to plan on his financial expenses for the month.

Cons: The entire amount repaid is higher and hence overall interest rate is high.

  1. Adjustable-rate mortgage or ARM

These mortgages after allowing ‘basic’ interest rate for certain period, ‘adjusts’ accordingly, depending upon market indexes like inflation. The typicalbasic interest period is for 5 years.

Pros:The entire loan amount repaid might be lesser when compared to the fixed-rate mortgage.

Cons: The buyer should be readyto meet the adjusted rate changes every month and hence cannot be sure of his monthly financial commitments. Also, on certain months, the interest might be very high according to the market’s fluctuations.

Mortgage, in itself is a complex financial system and hence you should do a thorough research before zeroing on a type. Approaching a qualified loan advisor will relieve you off from major stress, even though they come with a definite price.

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