In what can be the rather precarious world of borrowing and lending, two different types of loans appear to be oceans apart, that being micro-loans (short term loans) and mortgages. The general consensus is that a mortgage is something which is more positive than something like a short term loan, simply because of the timeframes involved in each of those loan types as well as the interest rates.
Mortgage and the associated terms can be a bit confusing for investors and many would check websites Amerinote Xchange to understand them better. While short-term loans do indeed come with considerably higher interest rates than mortgages, however, these two types of seemingly polar-opposite loans have a lot more in common than one might think.
The housing market is what they have in common in that they can both be used rather astutely to help first-time home buyers take their first step up the property ladder. Oftentimes, many real estate companies (such as Reali) also tend to provide loan services for home buyers. Along with helping them find a new house, or sell their previous home, these companies also provide financing options. Therefore, before choosing a loan or a mortgage, you should fully research the different types of loans to see if there is one with more benefits for your situation. For example, if you are a USA veteran, you might be eligible for a VA loan and you can find out more information about this at a website like https://thewendythompsonteam.com/usaa-vs-navy-federal-for-va-loans-cost-service-alternatives/. I’m talking about a First Time Buyer Mortgage, which perhaps exists as an extension of the Help to Buy ISA, which I’ll discuss in a moment, but first I want to focus on the First Time Buyer Mortgage.
First time buyer mortgage
So a first time buyer mortgage is a scheme which is offered by banks to help first-time homebuyers get onto the property ladder. They do this by requiring a comparatively low deposit of just 5% as compared to regular mortgages which carry a much higher minimum deposit. Additional perks are often also offered as part of the deal, like some cash-back eligibility.
Now, where micro loans come into play here is through their use to raise the required amount to make up the 5% deposit. This can have some rather significant implications to factors such as the value of home you’re now able to buy since the required 5% to be raised could be given a mega boost through something like a short-term loan.
So in essence, the short-term loan acts as a vital cog in securing a long term loan in the form of your mortgage and the short term loan could make for the difference between being able to get a mortgage on a 320,000 as opposed to the 300,000 home you would have rather had to settle for, for example, had you not gone out to borrow an extra 1,000 to add to the 15,000 you might have initially had as a deposit.
16,000 versus 15,000 as a 5% deposit makes a big difference to the value of the house you would be eligible to get a mortgage for and in this particular instance that difference equates to a 320,000 home versus a 300,000, so micro loans can make a huge difference since a house worth 320,000 comes with a lot more than worth 300,000.
Help to buy ISA
Now I won’t get into too much detail about help to buy ISA’s, but they’re worth mentioning because the government comes into play as a finance-boosting party to help first time property buyers make their way onto the property ladder. You can learn more about the help to buy ISA scheme and other mortgage schemes on this blog post from Mr Lender.
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