Are you familiar with the following terms: seller financing, bank financing, leasing and equity? If these cause you to crease your forehead, do not be too alarmed because these are very easy. In a nutshell, these words are related to real estate financing options and should help you get on to your way of snagging that cool apartment or much-coveted home. Sellers and bankers usually throw these words around especially during property selling deals, but the financing options that are related to this can be broken down in a much simpler form.
First, you have the concept of bank financing. This is the best tip that you can follow in purchasing or financing your own home. This will usually entail taking out loans from a reputed financial institution such as banks, and then coming to an agreement when it comes to the amount of down payment you want to make. The interest schedules that are related to this are also discussed. Another name you can call these loans is called mortgage, which comes in two kinds. First up is the fixed rate mortgage, where the interest amount is set for the entire life of your loan. The second type is called an adjustable mortgage rate wherein the interest rate can vary depending on the loan term.
Second is the concept called seller financing, which is also another great tip to follow. This is one home financing technique wherein the buyer will actually borrow money not from the bank but from the seller himself. Situations that usually call for this technique include times when a buyer has not the right kind of credit rating score that will let him take out a loan from the bank, or he really does not want to loan from any financial institution at all. This second method will allow the seller to accept your down payment and arrange for the buyer’s loan.
Other details that are connected to this include writing a promissory note to the seller so the monthly payments are ensured and are done on time for a specific period of time. In essence, this promissory note will act like a deed. There are also some benefits related to this technique, the biggest being that it saves the buyer less time in getting approved. There is also less paperwork because you transact directly with the seller himself and need not wait for the financial institution to process things in their own time.
The last two ones are called equity sharing and rent to own. The first one can be applied when you really cannot afford your own home and you need other sources of income to get the house. You get partners that will also own the property with you for as long as they are not married to the other partners. The second, which is rent to own, us where the renter will provide a down payment and the succeeding payments he makes will go towards the payment of the total value of the home so in time it will be his own.
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