Financial Blog

The short answer is: it depends. Perhaps the better question to ask is: “What will I use a Home Loan for?” Now, to better answer these questions, let’s take a few steps back and look at what a home loan is.

Read more: 8 Simple Tips to Get Approved for a Housing Loan

Getting a home loan is simply borrowing money with interest for a specific period of time in order to buy or renovate a house. That is the textbook definition. However, the reality is a little more complex.

There are different types of home loan, each characterized by how you’ll use them. Let’s go over the most popular ones.

The most common reason why people get a home loan is to purchase property: house and lot, a townhouse, duplex, condo or a vacant lot. This is the basic type of home loan which is offered by every bank: the Home Purchase loan. Most banks offer around 70-80% of the appraised value of the property.

If you’ve been eyeing a condo near work or maybe a townhouse for your growing family, this is the loan you need. Take note, however, that furnishing a property is not covered by this loan (Read: Personal Loan). So if you’re planning to buy a bare condo or house, remember that you might need to get funding for your sofa or TV elsewhere.

Designing and building a house from the ground up might be something you’ve always dreamt of. It might be a lot of work, but being in charge of planning, designing and construction gives you creative freedom. A Construction Home Loan gets you the cash you need to make your dream home a reality.

If you have an existing home in a location that you already like, then renovating it could be more practical than moving to a new house.

Use a home loan to breathe new life into your home by repairing or replacing damaged parts of your house, extending your kitchen, adding a new floor, or giving the façade a modern facelift. That man cave or the swimming pool you’ve always wanted? Why not!

Are you not happy with your current lender’s customer service? Or maybe their interest rates are astronomical? To save on payments, you can move your existing home loan to a bank with lower interest rates.

Aside from getting rates, you can also refinance to get a new loan term. Getting a shorter term can slash years of paying interest, even if it means higher monthly payments. Though not advisable, opting for a longer payment term is also possible (and could be beneficial) if you want to have lower monthly payments when you are strapped for cash.

A home equity loan uses a portion of your home’s current value as security for the cash you’ll be getting, which you can use for just about anything. It works just like a big loan with collateral.

My advice: use it for urgent matters or something that will give you value in return.

Getting extra cash for your business, paying off other debt, etc. A word of caution though: If for some reason you default on your loan, your property will be repossessed. Think long and hard before committing to this option.

Now that you know the many uses of a home loan, choosing the right option is the next step. With a Security Bank Home Loan, you get to choose from a variety of payment terms, low interest rates starting at just 7.00% fixed for 1 year, and flexible payment options suited to your needs. You can choose to pay higher or lower per month depending on your needs.