Are You Considering Taking a Home Loan? Here’s What You Should Know

You have probably come across homeowners complaining of overcharged home loans that mostly arise from unclear terms and conditions spelled out on the home loan contracts. There are facts that you should know about the loans to avoid disappointments when taking a home loan.

Application Fees

Owning a piece of property can be exciting, but it isn’t a smooth ride especially if you choose to acquire it through a home loan. Do not be surprised when your home loan lender charges you an upfront free for you to access credit. In most cases, the fee is non-refundable after the review your credit status.

Break-Cost Fees

Some lenders might charge you a few dollars for trying to break a fixed term rate early into the loan if you started with a fixed interest rate. It may also apply if you decide to switch to a new lender or begin to pay the home loans too early into the contract. It is advisable that you study the terms and conditions provided by the loan lenders before proceeding to sign for the home loans al.

True Rates

Lenders tend to separate the interest rates from other common charges such as ongoing and application fees. With the interest rates laid out excluding the standard costs, a client may perceive a lower true rate than the one provided by the lender. In the course of payment, these comparisons tend to bring in complaints from the clients termed as “overcharged.” True rates will help you compare prices with other lenders enabling you to go for the fairest of all. Be sure to request for a true calculated rate from your lenders before signing the contract.


These terms may turn confusing to the average homeowner. Equity in a home loan describes the amount that you own as per the property’s value without including the home loan. For instance, if the value of your home stands at $700, 000 and you owe the lender $500, 000 on your loan amount, your equity is $200, 000. This will help you read through and follow up with your contract, and the numbers indicated.

Fixed Interest Rates

Fixed interest rates require that you pay your loan balances over fixed periods and fixed cash portions. This option is the safest for first time home buyers who borrow on a strict budget and need repayment consistency minimizing the chances of bailing out on repayment. On the downside part of this loan repayment option is that the flexibility to change lenders or pay out early comes with high break costs that may turn out to be disappointing.

Formal Approval and Settlement

This is when the lender officially approves your home loan application. Formal approval happens when you have made an offer on a property, the bank has valued the property, and the property value has been agreed upon by both parties. Following the formal approval, a settlement is reached. A settlement is when the lender makes the final payment to the seller of the property. Upon settlement, your payment is now received by the lender.