Suitability of fixed rate loan and construction loan
Suitability of fixed rate loan and #construction loan#
Max
Fixed rate home loan has an interest rate and repayment figure that is laid down as locked for a fixed period which is usually between one and five years. The purpose of fixed rate home loan is to offer some constancy for the borrower in the early years of the loan.
Generally young borrowers undergo a lot of financial difficulties in their initial stage of careers. They cannot afford to pay higher repayments suddenly as the rates rise. Thus, it is better for them to overcome the risky situation and take a fixed rate loan. After the fixed term, the loan may be shifted to a variable home loan, or you can arrange to have another fixed term.
The economy is unstable, at any time the rates may rise and fall; the basic advantage of the fixed rate home loan is that in situation of rising interest rates, the borrower’s home loan interest rate will remain at the same, agreed level. However, the same thing becomes a disadvantage as the borrower will not receive the benefit of any decreases in home loan interest rates.
Construction loans are used for the purpose of building a new home. Usually lenders lend up to maximum of 95% of the land and construction cost. The lender lends the funds to the builder at various stages throughout the construction of the home as work is completed. While the construction process is going on the repayments made by the borrower are usually interest only on the amount paid out, until the loan is fully drawn. After the building is complete the loan is then set at the rate for whichever product is selected by the borrower.
If you need to build a home for you, you can apply for a Construction Loan. Suitability of fixed rate construction loan depends entirely upon your personalized requirements.
Max is a Mortgage Broker who has specialized in no deposit home loans for over 5 years.http://www.homeloanexperts.com.au
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