In choosing a home loan, we need to look at other factors such as term of the mortgage, prepayment privilege, and flexibility of refinancing before finalizing our decision. We need to understand the impact of these factors in our pockets and our lives. Buying a house apart from a car, if you already have one, could be the biggest purchase you would be making that entails a long-term relationship with the bank or lender. The first thing that we need to examine is the interest rate. Some housing loan packages specify a certain interest rate for 3 or 5 years and then increase the rate.
If this is the kind of package that you are reviewing, please evaluate if the present benefits outweigh the higher interest rate you would be paying in the future. In addition, you need to know if you are allowed for any prepayment privileges. Paying a part of the capital during bonuses is the best way to lessen the interest. If the home loan terms and conditions you selected do not allow prepayment then you need to make a realistic assessment of the interest expense you are about to incur.
Investigating all the options available will help you identify the pros and cons of these offers against your selected housing mortgage. What about the amount of equity you need to work out and get from your personal pocket? What about the amount in excess of the equity you need to pay every month? As a borrower, you need to balance the amount of equity that you would be paying in cash now and the interest rate on the amount you need to borrow in excess of the equity. The term of the loan is very important because this will give you an idea of how interest expense you are paying each month. If you can make a larger equity, then I think it is better to pay a larger amount in cash than incurring bigger expense later.
As many agents have been talking about all the important factors, we should not forget that after sales service is also essential when choosing a loan. I would choose a bank that would still provide the same level of service quality after I finish signing the loan papers. Make sure that they would still be interested to listen and find solutions to your problem related to the house, mortgage, and payments after you sign the loan documents.
During the life of the loan, the bank may create or promote new loan packages. You should clarify if you can change your type of loan to the new loan packages. Sometimes, new loan packages are better than the old ones.
Are you going to apply the loan directly to the bank or use a broker? This question is very important. This will help you evaluate the kind of problems you will be facing in the future.
By Ella Mathews