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Advantages and Disadvantages of a Property Loan Flipbook PDF
Owning a home is a dream that nearly all of us have in our minds. To most of us, the way to make this dream come true is
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Advantages and Disadvantages of a Property Loan
Owning a home is a dream that nearly all of us have in our minds. To most of us, the way to make this dream come true is with a property loan. A property loan is the amount of money borrowed from a financial institution or a bank to construct or purchase a house. It is a secured loan where the estate is mortgaged to the lender as security until the loan is repaid. The bank or financial institution shall hold the sale or title of the estate until the loan has been repaid with interest due to it. Once you have paid off, the bank will hand over the papers of your house to you. Taking a property loan is a big responsibility, as the tenure of the home loan goes somewhere between 10 and 30 years. So before you decide whether or not to take a home loan, you need to know both aspects of these types of loans. Some of the strengths and weaknesses of a home loan are brought into focus. Advantages A Mortgage Makes Homeownership Affordable
Mortgage loans are very useful for average earnings or employees to have a home. Home loans are given on the scale of your credit score and, above all, your repayment capability. If you have a regular income and hold the EMI service capacity, banks will readily give you a home loan. Furthermore, the home loan comes with a longer tenure. A longer tenure implies a smaller mortgage amount. Capital Appreciation This is another major advantage of a property loan, as capital appreciation in the case of real estate prices over the last few decades has been much higher than the interest needed to be paid on the housing loan. Proper Due Diligence of your Property Buying property is a lifetime purchase; therefore, it should be taken with a lot of caution. If you purchase a home with a home loan, the bank will go through the project paperwork with a team of specialists. Careful verification of the property papers, and if the property is free from any legal disputes, shall be checked by the lender prior to the sanction of the loan. So you can be assured of the legal aspects of the property and guarantee of your investment. Higher Loan Eligibility If you are in charge of your EMIs or have completed the repayment of your home, your eligibility for the loan will be increased as you will be the owner of a property with a high market value. You can use your property for LAP (loan against property) or HELOC (home equity line of credit) for a higher and affordable multi purpose loan. Disadvantages A Property Loan is a Big Commitment You are making a decades-long commitment when you are approved for a home loan. Most home loans come with a term of 10 to 30 years. That means a significant period of your life; you have to be under debt.
Things will be more difficult if you want to move out or want to sell the property during this period of time. They Carry Some Risk Ten years or two are a long time, and our future is, of course, unforeseen. Circumstances may arise that may make it difficult for you to keep up with your home loan repayments. Unforeseen life events, such as illness, unemployment, or divorce, could put you in a difficult financial condition, and your inability to repay the loan could lead to a loss of property. This means that the bank has the authority to sell your home and get back the money that the bank has given as a home loan. Presence of Opportunity Lost This is the disadvantage often overlooked by home borrowers. No matter how much the borrower pays as a principal component during the year, the odds of getting a return on that amount are wasted.