Home loans in a world depression, what are the options

Home loans in a world depression, what are the options?

There is no doubt we are living in the greatest world depression since the Second World War. Everywhere and everyone is feeling the backlash of the depression which includes a severe credit crisis. This crisis has affected the housing industry in different and wonderful ways. Some of the ways the Real Estate sector has been affected were not immediately obvious, and are still difficult to understand and foresee.

For instance a severe drop in the sales of homes in October 2008 to January 09 was contrasted with rise in new and used homes in February. The exact reason for this is disputed. Some explain it with a natural realignment of the offer and demand forces in Economics. The prices of homes were slashed due to the fall in the demand to the point that the prices were so low they fueled a demand of their own. Construction companies have reduced their prices too, in order to compete with the prices of repossessed houses and the overall drop in the prices of homes.

What was once seen as a safe bet, a secure investmen is no longer so. Realt Estate is no longer safe as houses and bricks. However we all still need housing. Are houses and Real Estate still a good investment?

This article will look to describe the options open to house buyers and the pros and cons associated with them.

The actual options of home buyers have not changed that much,variable interest loans, adjusted rate mortgages and fixed rate loans. However the effects these options have are different.

Fixed rate home loans. Fixed rate loans had previously been seen as a pessimists route. An option for anal retentive buyers who like to plan out every payment for the tenure of the loan. Fixed rate loans provide a rate for the entire term of the loan, it does not change whatever happens to the national interest rate. The catch of this loan type is that the interest rate is 9 times out of ten higher than with a variable rate. The reason for this is that finance companies will add on extra interest points to protect their investment. The good news now is that because of the worldwide depression, government bailouts and efforts to reduce the interest rate you can buy fixed rate home loans for up to 30 years for interest rates in the low 4% bracket. This is a record low level for fixed rate interest loans. If you have the credit score (finance companies have got much stricter on this), have some savings to put into the house (It is rather hard to get 100% finance, although there are options) and have a steady source of income.

A good advice in such unstable times is to purchase insurance on your loan for loss of employment. With the interest rates so low it is worth investing some of your savings in a mortgage insurance.