Annuity Loan!

Most of us buy our homes through mortgages. We need to approach a bank to borrow enough money to be able to own our homes. Most of the banks prefer it if some amount of capital is put down by us, so that we don’t end up borrowing the entire value of the property concerned.

Each of the banks has their own set of rules. The interest charged on the amount borrowed depends a lot upon the amount of money we put down as capital.

It is always better to spend sometime researching before taking an important financial decision. Check out the mortgage terms and conditions of various banks before you zero-on to one bank. Taking out a mortgage to buy a house is a major choice which will affect you and your family for a long period of time.

You can also check out if the local authorities have any special scheme which may be just right for you. They float special schemes regularly. If you are lucky it may be the right thing for you.

There are two major variants of mortgage:

A. Annuity loan
B. Serial loan

Annuity loan

When you take out an annuity loan, you pay equal installments throughout the term of your loan, barring an increase in the interest rates. During the early period of repayment, the installments consist mainly of the interest and have a very small portion of the principal.

With time the interest portion of the repayment decreases and the principal amount increases. Incase there is an increase in the interest, the installment amount increases without effecting the loan period. An annuity loan is costlier than a serial loan as the interest turns out more. In spite of this people prefer annuity loans above the serial loans as the initial monthly costs are lower.

Serial loan

The initial monthly installments are high and with time the installment decreases. This due to the fact that the interest portion of the installment is fixed and with time the principal gets paid. The serial loan is cheaper to the pocket as the installments you pay in the early repayment period are quite large.

You can even invest some time on the net and visit the websites of the banks concerned. Most of them have a calculator, which you can use to calculate the monthly installments. There are two ways you can use them. you can put in the loan amount and the period of loan and calculate the monthly installments. Another thing is that you can put in the monthly installment you can afford and calculate the time period for repayment.

This time will be well spent as you will be able to compare what each bank has to offer. You can easily compare their terms and conditions and decide which suit you the best. Choose between annuity loans and serial loans, depending up on the monthly payments convenient to your pockets.

Mortgage is a major financial decision which will affect your financial condition for years to come. Think carefully and take a decision right for you.

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Annuity Loan!