Home Relocation Loans – Overview
Many banks in developed countries offer their customers a variety of home loans. Relocation loans are a type of home loan with certain differences, reflecting this financial instrument’s actual purpose. Relocation loans however are aimed at private home owners, not people living in rental accommodation. The idea of a home relocation loan is to alleviate the stress of timing the sale of existing property and that of the new property purchase. Depending on which particular bank is engaged with the relocation loan, its actual duration may vary. Generally though, customers have six months to build or purchase their new home, and another six months to sell the existing property.
Many people use home relocation loans to cover the deposit (down payment) asked for their new home, then borough the balance as a type of settlement required for man and van removal costs, stamp duty and other accompanying fees. Basically, a home relocation loan is a suitable alternative to bridging financial instruments as it comes with a more competitive interest rate.
Most banks offer two main types of home relocation loans, one is called a relocation plan with NO end loan, and the other is known as relocation loan with an end loan. In the first scenario, customers cover their initial relocation loan at once, solely from the funds acquired by the sale of their existing home / property. In the other case, the one WITH an end loan, customers are using a combined bank tool consisting of the actual relocation loan and another mainstream home loan offered by the financial institution or bank. In the latter, once the home relocation loan expires, and the existing property is sold, customers have now entered their selected home loan scheme. Relocation loans with an end loan require people to cover two loans at the end – the initial relocation one, and the one they selected through the bank. Although this might seem impractical, it is actually a very suitable alternative for some households looking for extra financing.
The better banks offer their customers different interest rate & loan plans. Say a customer has secured and been granted both a relocation loan, and another loan (end loan), they will be provided with a standard interest rate by the bank, but their repayment scheme is likely to be more favourable, or they can be given with a choice from different (more favourable) end loans. By default, most banks and financial institutions make relocation loans available to owner occupiers, also investors buying a property, contract building or buying land to build (in cases where the property will be finished within the next six months). Relocation loans are not usually available (and somewhat suitable) for owner building, vacant land purchases/sales and extended settlement loans.
Of course, choosing and committing to a given relocation loan should be done after careful consideration. It is recommended to consult with a financial advisor who will be able to weigh the pros and cons of using one such bank loan given the particular set of circumstances.