So, you have made a decision to take a loan and purchase real-estate and you are extremely excited to start a new period of your life as a property owner. First of all, congratulations! Whatever you might be considering, be it a condominium, a flat, a house or a cabin in the woods, that is an extremely mature decision to make. However, that is also a decision that will have serious financial implications for a long period of your life, so you shouldn’t let the excitement cloud your judgement regarding the decisions you are going to make when borrowing the funds from a bank. There are several things to consider before you agree to settle with conditions set by the bank.
1. Know what you are getting into
Before you take out a housing loan you should know that mortgages or housing loans are secured loans. What this means is that when the borrower is taking a loan, they pledge some assets, which in this case is the house being bought, as collateral for the loan, as Investopedia.com explains. In other words, by making the borrower pledge their property as collateral, the bank ensures that it does not experience financial losses in the event that the borrower fails to make the payments. To put it simply, once you take out a housing loan you are obliged to cover the debt or you face losing your property.
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