Brief Overview Of Home Loan

Before we start discussing what home loan it is very important to understand two basic terms that we are going to be using frequently in this paper, that is home and loan. What is a home? - Home is a social unit formed by a family living together (Merrian Webster Dictionary). What is a loan? – Loan is basically a debt given by a bank or any other financial unit, loans are to be paid back with some interests on top. Nowadays it is very difficult to own a home without getting some loans to fund it. With life increasingly becoming very difficult, the prices of everything are virtually going up. Housing has become very expensive whereby the majority of the population hardly find a penny to pay for their rents. With increase in population there is emergence of informal settlement schemes like slums. Basing arguments on these factors many people are nowadays looking for ways to get their own homes but it is very difficult to get cash to directly purchase a house. Actually purchasing a home is beyond the reach of many. This is where banks step in to help with home loans and mortgages. So what is home loan?

We can define home loan generally as money one borrows from the bank or any other financial institution to purchase a home or a property. This usually comes with some sort of security maybe a registered mortgage to the bank over the property or home being purchased. The topic on home loan or as sometimes referred to as housing finance is a broad topic and can be discussed differently according to the country you are originating from, this is because different countries have different laws regarding the issuance of home loans to its citizens.

There are several factors that have led to growth of home loans, some of these factors are:

• Affordability – home loans have become affordable and available to the majority of the citizens unlike some years back when getting a home loan was very tiresome.
• The rise of middle class citizens – Most of the middle class citizens are nowadays trying get their own homes hence reverting to home loans instead of paying rents.
• Urbanization – With many people moving to towns there is need for more housing facilities, but the population growth is too high hence need for effective housing plans. This is where many people revert to taking home loan.

Conclusion

Home loans have become available to most of the citizens, this helps in reducing the housing gap in most of the urban centers. There is reduction of slums and the rise of decent housing schemes. This in turn has led to reduction of poverty hence economic growth in the country.