Residential Real Estate Loans

Residential Real Estate LoansA residential area is land where the predominant use is residential. In areas that are residentially zoned, buildings may include single family housing, multiple family housing or mobile homes. Zoning for residential use may permit some services or work opportunities or may totally exclude all business and industry. To purchase a residential space involves large funds. Not all are capable of procuring these amounts. In such scenarios, people prefer to borrow the money from banks, financial institution or brokers, in the form of a loan.

A loan is form of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower. The borrower initially receives an amount from the lender, which is paid back, usually but not always in regular installments, to the lender. There are so many home loan schemes these days with an increasing range of rates, fees and features that it really pays to shop around. It may appear a bewildering prospect but there is a loan out there that best suits each individual’s circumstances.

A number of lenders in the US offer “reverse mortgage” loans. These are targeted at retired people who own their own home but have little cash to live on. They are termed “”reverse mortgages”” because instead of borrowing money to buy a home, borrowers are using the home that they already own to secure funds that can be used elsewhere. This style of loan allows the ‘cash poor, asset rich’ people to create a cash flow out of the equity built up in their home, without having to sell it. The advantage with this type of loan is that it allows a homeowner to generate money and yet retain the asset.

The main challenge is to look beyond interest rates to the features that a home loan offers. Often, there is a trade off between interest rate and flexibility. It is essential to ensure that the loan suits the repayment abilities of the borrower.

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