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Mortgage Loans

Understanding Home Loan

Home Loan is a type of secured loan where the property is mortgaged to the lender as a security until the loan repayment is done by the borrower. In case of the Home Loan financing, the bank or financial institution holds the title or deed of the property till the loan repayment is done.

Refinance is, essentially, a tool which allows the home loan customers to smartly tackle the fluctuating circumstances to their own benefit. Refinance tool can help the home loan investors substantially reduce the cost of their home loan, if done with proper research and thought process.

To put it simply, Re-financing is a process of taking another home loan to pay off the financing of the existing Home Loan. One of the most common reasons to refinance a mortgage/home loan is to take the advantage of the lower interest rate on the refinanced loan.

Reverse Mortgage is a type of home equity loan that is extremely beneficial to the seasoned investors who have accumulated enough home equity and want to use this to supplement their retirement income and other financial goals. A reverse mortgage, also called the home equity conversion mortgage (HECM) in the United States, is a unique financial tool for the property investors or homeowners. A financial instrument designed largely for the retirees aged 62 years or above, it is an excellent way that allows the senior citizens to achieve their financial goals.

The VA loan is a specialized mortgage loan category that is guaranteed by the U.S. Department of Veterans Affairs (VA). This type of home loan is only issued by the approved lenders and is backed by complete government security. VA loan is a unique and a powerful financial tool in the form of a home loan that is created specifically for the military home buyers.

The VA Home Loan program is an extremely beneficial loan proposition for the service members. Considering the strict lending requirements in the recent years coupled with ever-fluctuating housing market rates in the US, applying for a traditional home loan becomes a nightmare for the military homebuyers. In such a scenario, the VA Loan is no less than a boon for the military homebuyers who find it extremely difficult to trade the otherwise tough home loan requirements, large down payments, and strict credit standards.

In case the outstanding loan amount is less than 80% of the home’s appraised value, an investor might be able to refinance into a loan without mortgage insurance.

An FHA loan is a kind of mortgage that is insured by the Federal Housing Administration. With the modern-day FHA loans, one can’t cancel the mortgage insurance even when the loan-to-value ratio falls below 80 percent. The only way to get rid of FHA mortgage insurance payments is to refinance the home loan.

The process of Home Loan Refinancing

The process of refinancing the existing home loan is pretty simple and work as below-

  • Once the home loan investor identifies the opportunity with a lender who offers better rates, terms, and conditions, they initiate the process of refinancing the existing home loan
  • Home loan investor reaches out to the new lender with details, which in turn, settle all the dues with the existing lender and take over the outstanding loan amount
  • After the completion of all the refinance formalities, the investor start paying EMIs to the new lender

Below are the main types of loans available in the market-

  • Secured loan– A loan in which the borrower pledges some asset (e.g. a car or property) as a security to the lender. Example: Mortgage loan
  • Unsecured loan– Are monetary loans that are not secured against any of the borrower’s assets such as property. Examples of this type of lending: Personal loan, credit cards
  • Demand loan– Demand loans are short term loans with no fixed dates for repayment and carry a floating (changing) interest rate.
  • Subsidized loan– A subsidized loan is a loan on which the interest is generally reduced by an explicit or hidden subsidy granted by the lender.
  • Concessional loan– Are granted on easier terms than market loans in the form of below-market interest rate

Important Definitions and Terms related to the Loans

Understanding the term ‘loan’

A loan is a financial concept where the lending of money from one individual, entity or organization to another individual, organization or entity takes place.


  • A loan is a kind of a debt that is given on certain pre-decided interest rates.
  • A loan document is prepared between the lender and the borrower as the proof of the transaction.
  • It contains the details of the principal amount of money borrowed; the interest rate the lender is charging, and date of repayment.


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